Recently, the IRS issued new guidance for employers on the rules that will apply to the Employer Retention Tax Credit (ERTC) for the first two quarters of 2021.

The ERTC provides businesses that have experienced a significant decline in revenue (as defined in the rules) or that were fully or partially closed due to a government order with a refundable tax credit based on qualifying wages paid to eligible employees.

Originally a business could not obtain both a PPP loan and the ERTC – but that rule was eliminated and now businesses can take advantage of both programs provided that wages paid with PPP funds are excluded for the purpose of calculating the ERTC. Businesses that may qualify for the ERTC are strongly encouraged to work with their advisors to ensure that they are maximizing their potential benefit under this program.

Changes to the Employee Retention Credit for the first two calendar quarters of 2021 include:

  • the increase in the maximum credit amount,
  • the 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.

A copy of the new guidance may be found here