The Notice defines nominal portion to be a portion which is 10 percent or less of the total gross receipts of the business; or uses 10 percent or less of the hours of service performed by employees in the business. The credit is equal to 50% of qualified wages paid, including qualified health plan expenses, for up to $10,000 per employee in 2020. An employer's size is a factor in determining qualified wages. Some are essential to make our site work; others help us improve the user experience. endstream endobj 200 0 obj <. Employers should continue to monitor the IRSs interpretive guidance for upcoming guidance on ERCs paid pursuant to the American Rescue Plan Act (ARPA). On Aug. 4, 2021, the IRS released Notice 2021-49 (Notice), which amplifies both Notice 2021-20 and Notice 2021-23 by providing additional guidance on the employee retention credit (ERC), applicable to the third and fourth calendar quarters of 2021. As originally enacted by theCoronavirus Aid, Relief, and Economic Security Act(CARES Act), the employee retention credit provides a refundable payroll credit for eligible employers, including tax-exempt organizations, whose business has been affected by the coronavirus (COVID-19) pandemic for qualified wages paid after March 12, 2020, and before January 1, 2021. window.dataLayer = window.dataLayer || []; The ARPA additionally provides that for Q3 and Q4 an employer whose gross receipts declined more than 90% from the corresponding quarter in 2019 is a Severely Financially Distressed Employer (SFDE). Clarifications on unanswered questions for 2020 and 2021 ERTC L. No. Read . . The IRS issued Notice 2021-49 Wednesday that includes guidance on the extension and modification of the employee retention credit (ERC) under Sec. The Notice further provides that the guidance in Notices 2021-20 and 2021-23 continues to apply for the third and fourth quarters as much of the ARPA extension mirrors prior statutes on ERTC provisions. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. 117-2. Clarifications for All Periods. Thompson Coburn LLP continues to monitor these important developments in the CARES Act and other Federal relief efforts. Notice 2021-23 explains that additional guidance will be published regarding the ARPA ERCs. Section 3111(e) of the Code permits qualified tax-exempt organizations that hire qualified veterans to claim a credit against the employers share of social security tax imposed under section 3111(a) of the Code. Section 207 of the Disaster Relief Act expanded the definition of small employer for the first two quarters of 2021 to include those with 500 or fewer full-time employees in 2019 (up from 100 or fewer for 2020). For the first two quarters of 2021, the maximum per-employee qualified wages that may be taken into account increase to $10,000 per quarter. Partial Suspension of Operations Eligible EmployersQuestions 1-6B. This is the second of published guidance from the IRS on the ERC (third if you count the initial IRS website FAQs) and yet more guidance is expected. As we have previously discussed, Notice 2021-20 formalized much of the informal guidance on the application of ERTCs that was issued by the IRS via FAQs over the course of 2020. Please click Notice 2021-23 clarifies that, as in 2020, employers may access the ERC for the first two quarters of 2021 before they file their employment tax returns by reducing their employment tax deposits (see Tax Alert 2020-0816 for requirements in 2020). Presented research was carried out in 2021 and 2022 on the Felix soybean variety at the Agricultural Research and Development Station Turda, located in the Transylvanian Plain, Romania. Notice 2021-23 provides the following key rules for the ERTC program for wages paid after December 31, 2020 through June 30, 2021: In addition to the specific issues discussed above, Notice 2021-23 includes further discussion of the rules for ERTCs claimed for the first two calendar quarters of 2021. )]B|v/SLQg Ci9h-YOK Notice 2021-23 provides the following key rules for the ERTC program for wages paid after December 31, 2020 through June 30, 2021: In addition to the specific issues discussed above, Notice 2021-23 includes further discussion of the rules for ERTCs claimed for the first two calendar quarters of 2021. An employer that was not in existence during 2019 can use the relevant quarter in 2020 for the reference period, and. A governmental entity that is a college or university, or the principal purpose or function of which is providing medical or hospital care, is an eligible employer for purposes of ERTCs for wages paid in the first two calendar quarters of 2021. On Aug. 4, 2021, the IRS released Notice 2021-49 (Notice), which amplifies both Notice 2021-20 and Notice 2021-23 by providing additional guidance on the employee retention credit (ERC), applicable to the third and fourth calendar quarters of 2021. Individual J and Individual K are both employees of Corporation C. Pursuant to the attribution rules of section 267(c), Individual K is attributed 100 percent ownership of Corporation A, and both Individual J and Individual K are treated as 100 percent owners.However, Individuals J and K do not have any of the relationships to each other described in section 152(d)(2)(A)-(H) of the Code. Additionally, the guidance clarifies that eligible employers are not prohibited from claiming the ERC and 45B tip credit on the same wages, again, if all other requirements are satisfied. The Agreement awarded through this RFP process will replace the current Third-Party administrator service Agreement for the Savings Plus Program (Savings Plus . Definition of "Qualified Wages"IID. If only part of the PPP loan is forgiven, then the employer is deemed to make the election for the minimum amount of wages that are necessary to result in the forgiven amount. Prior Ropes & Gray LLP coverage of ERCs includes alerts on the CARES Acts tax-related provisions, initial ERC guidance, CAAs tax-related provisions, and ARPAs tax-related provisions. 2021-1-25 20:30. Accordingly, wages paid by Corporation C to Individual J and Individual K in the first calendar quarter of 2021 may be treated as qualified wages if the amounts satisfy the other requirements to be treated as qualified wages. The changes made by the ARPA include the following: making the credit available to eligible employers that pay qualified wages after June 30, 2021 and before January 1, 2022, . 281 (March 27, 2020), as amended by section 206 of the Taxpayer Certainty and . Sections 206 and 207 of the Disaster Relief Act extended and broadened the expiring ERC. The IRS issued Notice 2021-49 Wednesday that includes guidance on the extension and modification of the employee retention credit (ERC) under Sec. Interaction with Paycheck Protection Program (PPP) LoansQuestion 49J. This site uses cookies to store information on your computer. Purpose II. The employer does not reduce its deduction for its share of Social Security and Medicare taxes by any portion of the credit. Notice 2021-20 implements the CAAs change, with Section I (Answer 49) dedicated to explaining the interaction between ERCs and the PPP. Small employersthose with 500 or fewer full-time employeesmay claim advance payment of ERTCs to which they are entitled by filing Form 7200, Advance of Employer Credits Due to COVID-19, but such advances are not available to large employers (i.e., those with greater than 500 full-time employees) in the first two calendar quarters of 2021 like they were in 2020. An RSB is an employer: Pursuant to the Notice, for purposes of determining whether the first requirement is met, an RSB is not deemed to have begun a trade or business until such time as the business has begun to function as a going concern and performed those activities for which it was organized. Additionally, the Notice clarifies that tax-exempt entities can be eligible as RSBs, the RSB determination is made on a quarterly basis (regarding whether the employer is otherwise eligible under the Gross Receipts or Suspension Tests), and the aggregation rules that otherwise apply to the ERC apply when making that determination. The Journal of Accountancy is now completely digital. The Treasury Department and IRS issued Notice 202123, which amplifies Notice 2021-20, to provide guidance - regarding the ERC for the first two calendar quarters of 2021. 3134(c)(2)(C) (which prescribes how organizations exempt from tax under Secs. Guidance. Notice 2021-23 was subsequently issued with guidance concerning the employee retention credit for qualified wages paid for the first two quarters of 2021. Accordingly, please do not send us any information Today's notice expands on guidance previously provided in Notice 2021-20, which addressed the employee retention credit claimed for the 2020 calendar year. `kd00ch6lE0Q9Sq~9s;O#10 .n9 />;^F0t9@TA*Qo[5I; W$ >FQA!\ni;'j C|Ng6&68*t\ ), Notice 2021-20 formalizes previously issued guidance that had explained that a business whose workplace was closed by government orders was not considered suspended if it could continue operations comparable to its operations prior to the closure[. IR -165 (August 4, 2021) briefly explains that Notice 2021-49 addresses changes made by the American Rescue Plan Act of 2021to the employee retention credit. Baker Tilly US, LLP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. The new accounting standard provides greater transparency but requires wide-ranging data gathering. L. 1172 (March 11, 2021). There was a problem submitting your feedback. 3121(a) or compensation under Sec. G,-TSs7re%Z3n ^Y\-]]ZxA.w-qj;so[6|S(#.JIxhk:s5 ^WhF5f l\U]0 3134 (e) and Section 2301 (e) of the CARES Act, an employer's deduction for qualified wages, including qualified health plan expenses, is reduced by the amount of the employee retention credit. <>/ExtGState<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> In specific circumstances, the services of a professional should be sought. As a result, employers may claim the ERC for that portion of wages. However, Notice 2021-20 only applied to ERTCs claimed for wages paid in 2020 despite extension of the ERTC program through June 30, 2021, under the Relief Act. Employers claiming ERTCs may reduce their required employment tax deposits for the first two calendar quarters of 2021 to access ERTCs for which they are eligible. Notice 2021-20 provides further clarity to the previously issued FAQs by including a safe harbor for when a partial suspension constitutes more than a nominal portion of business operations (Answer 11), providing a non-exhaustive list of factors to consider when evaluating whether a business is able to continue its operations in a comparable manner (Answer 16), and providing a safe harbor and guidance regarding when a modification of operations constitutes a partial suspension (Answer 18. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. AnEligible Employeris defined in section 2301(c)(2) of the CARES Act means any employer, including an Internal Revenue Code Section 501(c) tax exempt entity, that was carrying on a trade or business during 2020 and either: The definition ofQualified Wagesdepends on how many employees an eligible employer has. For example, an employer could elect to be a Q2 2021 eligible employer if its Q1 2021 gross receipts are less than 80% of its Q1 2019 gross receipts. DETAIL. Notice 2021-20 incorporates most of the. By Isabelle Farrar, Alec Oveis, and Joshua Thomas. Under sections 7001 and 7003 of the FFCRA, employers with fewer than 500 employees that provide paid sick and family leave, up to specified limits, to employees unable to work or telework due to certain circumstances related to COVID-19 may claim tax credits. 1 0 obj in the case of a large eligible employer, work records and documentation showing that wages were paid for time an employee was not providing services. D+i j@NZsF@;dN4 ZHz&=O&2~$U{Xj"&3x^h2 uOZo7FiY2||8-eE*uI%db:1MjX:v\F_oDi4h Notice 2021-20 provides new guidance by providing a non-exhaustive list of factors that can be considered in determining if an employers modifications to operations allow the business to operate in a comparable manner: the employers telework capabilities; the portability of employees work; the need for presence in employees physical work space; and delays caused by transitioning to telework operations. When read together, Notice 2021-20 and Notice 2021-23 provided employers with information to assist in evaluating eligibility for the employee retention credit, in determining qualified wages, and for claiming the employee retention credit for 2020 and for the first two quarters of 2021. Section II.A. . The gross receipts test is modified such that employers whose gross receipts in either the first or second calendar quarter of 2020 are less than 80% (up from 50% for ERTCs claimed in 2020) of their gross receipts for the same calendar quarter in 2019 are eligible for the ERTC. Notice 2021-20 explains when and how employers that received a PPP loan can claim the employee retention credit for 2020. The IRS in early March 2021 issued Notice 2021-20 to formalize and clarify previously issued information contained in a set of frequently asked questions (FAQs) available on the IRS website with respect to the employee retention credit for the 2020 calendar year. (The additional guidance referenced in Notice 2021-23 regarding penalty relief is covered by Notice 2021-24.). The credit was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L 116-136, and amended by the Consolidated Appropriations Act, 2021, P.L 116-260. Regulations & Guidance IIH. Under the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), Congress retroactively made changes to the ERC, as we previously discussed. hbbd``b`$.