IRS Issues Guidance On Employee Retention Tax Credit
The Internal Revenue Service has issued updated guidance that will help employers determine their eligibility for claiming the federal Employee Retention Tax Credit (ERTC) for the first half of 2021. As a reminder, the ERTC was included in one of the initial COVID relief packages and is meant to help businesses keep their employees on the payroll.
The ERTC had been set to expire at the end of 2020, but Congress expanded it and extended the credit through the end of 2021.
The guidance explains the changes to the ERTC for the first two calendar quarters of 2021 only. These changes include:
- An increase in the maximum credit amount;
- Expansion of the category of employers that may be eligible to claim the credit;
- Modifications to the gross receipts test;
- Revisions to the definition of qualified wages; and
- New restrictions on the ability of eligible employers to request an advance payment of the credit.