IRS Releases Guidance Notice On Employee Retention Credit For Employers

The Internal Revenue Service (IRS) Notice 2021-20 provided a comprehensive guide on how employers can claim the employee retention credit for the 2020 calendar quarters. The Coronavirus Aid, Relief, and Economic Security (CARES) Act formed the credit.

The IRS claims that the guidance notice posted last year on their FAQs is identical to this year’s new update. However, it clarifies and outlines retroactive amendments under the current legislation.

The notice is for taxpayers who borrowed money from the Paycheck Protection Program (PPP). It is related to their credit’s increased qualifications.

IRS Releases Guidance Notice On Employee Retention Credit

The employers may claim the employee retention credit for 2020 if they paid the required wages from March 13, 2020, until December 31, 2020. And, if their operations were partially or fully suspended, or if their gross receipts had a severe decrease.

In 2020, the credit is equivalent to half of the paid qualified wages. Also, the qualified health benefit costs can reach $10,000 for each employee, together with a maximum credit of $5,000 per employee.

The employee retention credit for 2020 in Notice 2021-20 explains and specifies when and how employers who got a PPP loan can claim it.

The notice specifies who is entitled to receive the credit and what determines a partial or full suspension of business or trade activities. It also described what defines the gross receipts’ significant decline.

Besides, the notice states the qualified wages, and how much is the employee retention credit for an eligible employer. It discusses how an eligible employer can claim the employee retention credit and how the claim can be verified.

According to IRS, the notice on expansion and changes of the credit made by the Consolidated Appropriations Act of 2021 for the 2021 first and second quarters applies only to the 2020 regulations. IRS expects to provide more guidelines on the 2021 amendments soon.

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