Employee Retention Credits Modifications

Employer, take a look at the new guidance for the Employee Retention Credit to see if you can save!

IRS and Treasury Department have issued guidance on the Employee Retention Credit, including employers paying qualified wages between June 30, 2021, & January 1st, 2022.


Notice 2021–49 PDF [link] — Changes have been made in the American Rescue Plan Act (ARP, 2021) to Employee Retention Credits, they are applicable for quarters 3 & 4 of 2021.

Changes include:

  1. Credits will be available for Employers paying qualified wages in the period June 30, 2021, to January 1, 2022.
  2. The definition of an eligible employer to include Recovery Startup Business was expanded

To qualify for Recovery Startup Business, you must meet two criteria:

  • Having less than $1,000,00 average gross annual receipts for the 3 year period of 2018, 2019, and 2020
  • You started a new business or trade after February 15, 2020

3. The definition of “Severely financially distressed employers” was modified: the new basis is those whose income is less than 10 percent of the same quarter in the calendar year 2019 (2020 if founded in that year), instead of less than 80 percent.

4. Providing the Employee Retention Credit does not apply to qualified wages taken 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 under section 50003 of the ARP.

If you have doubts, common questions received by the IRS include:

  • Definition of “full-time employee” and if this includes “full-time equivalent”;
  • Treatment of tips as qualified wages and Section 45B Credit interaction;
  • If the wages of majority owners are treated as qualified wages.
  • If the wages of the majority of owner’s spouses are treated as qualified wages.
  • 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.

The IOOGO team of Experts is ready to help you with any doubts about Employee Retention Credits and other opportunities.

Contact us today!

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