There is Still Time to Claim Your Employee Retention Tax Credit
August 27, 2021
Eligible Businesses Can File Retroactive Claims
for Wages Paid in Prior Tax Quarters
On Aug. 4, the IRS issued further guidance on the
employee retention credit, including guidance for employers who pay qualified
wages after June 30, 2021, and before Jan. 1, 2022, and issues that apply to
the employee retention credit in both 2020 and 2021.
for Q3 and Q4
The new guidance addresses changes made by the American
Rescue Plan Act (ARPA) to the employee retention credit that are applicable to
the third and fourth quarters of 2021. Those changes include, among other
credit available to eligible employers that pay qualified wages after June 30,
2021, and before Jan. 1, 2022
definition of eligible employer to include “recovery startup
definition of qualified wages for “severely financially distressed
that the employee retention credit does not apply to qualified wages taken into
account as payroll costs in connection with a shuttered venue grant under
section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and
Venues Act, or a restaurant revitalization grant under section 5003 of the
Notice 2021-49 also responds to various questions that
the Treasury Department and the IRS have been asked about the employee
retention credit for both 2020 and 2021, including:
definition of full-time employee and whether that definition includes full-time
of tips as qualified wages and the interaction with the section 45B credit
The timing of
the qualified wages deduction disallowance and whether taxpayers that already
filed an income tax return must amend that return after claiming the credit on
an adjusted employment tax return
paid to majority owners and their spouses may be treated as qualified wages.
Employee Retention Tax Credit (ERTC) is expiring at the end of 2021, there’s
still time for eligible businesses to claim the credit, if they haven’t
already. Eligible employers can take advantage of the employee retention credit
against applicable employment taxes and qualified wages paid to their employees
through Dec. 31, 2021. Although the program is set to end at the end of 2021,
the credit can be claimed on amended payroll tax returns as long as the statute
of limitations remains open, which is three years from the date of filing.
The ERTC, also referred to as the Employee Retention
Credit (ERC), was created by the Coronavirus
Aid, Relief and Economic Security (CARES) Act, signed into law in March 2020, to encourage businesses
to keep employees on their payroll. The Consolidated Appropriations Act, 2021
(CAA), enacted in December 2020, and the American Rescue Plan Act (ARPA),
enacted in March 2021, amended and extended the credit and the availability of
certain advance payments of the credits through the end of 2021.
The ARPA, for instance, allows small employers that
received a Paycheck Protection Program (PPP) loan to also claim the ERTC.
with 100 or fewer full-time employees, all
employee wages qualify for the credit, whether the employer is open for
business or subject to a shutdown order
with more than 100 full-time employees, qualified
wages are wages paid to employees when they are not providing services due to
Eligible employers are private-sector businesses and
tax-exempt organizations that experienced:
A full or
partial shutdown of operations as
a result of a government order limiting commerce due to COVID-19 during 2020 or
receipts decline of more than 50 percent during
a 2020 or 2021 calendar quarter, when compared to the same quarter in the prior
“recovery startup” business that
was launched after Feb. 15, 2020, for which the average annual gross receipts
do not exceed $1 million, subject to a quarterly ERTC cap of $50,000.
For the gross receipts test, a business must have
experienced more than a 50 percent decline in 2020 (compared to the same
quarterly period in 2019) to be eligible. For 2021, a business must have
experienced more than a 20 percent decline in gross receipts, compared to the
same quarterly period of 2019. New businesses not in existence during a
particular quarter in 2019 are permitted to substitute the corresponding
quarter of 2020 for the comparison.
If your business experienced a substantial decline in gross receipts, but has since recovered and you did not claim the credit, TAC can help you claim it. If this issue affects you – we will reach out to discuss.
The final dates for eligible businesses to claim the ERTC is with their quarterly Form 941 tax filings, due October 31 and December 31, 2021. Business tax filers will need additional payroll data and other paperwork to file for the ERTC with their quarterly returns.
will be proactively reaching out to all clients who qualify for the ERTC over
the next few weeks. Please do contact us about this specific issue – if you
qualify, we will be in touch. If you do not qualify – then we will not be
contacting you about this.