Employee Retention Tax Credit 2021 Extended Till End of 2021 - ERTC 2021 Update

Описание: The new American Rescue Plan Act stimulus bill extended the Employee Retention Tax Credit until the end of 2021. This ERTC tax credit in 2021 provides additional financial help for small businesses during this Covid-19 pandemic.

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Employee Retention Credit
The act codifies the employee retention credit in new Sec. 3134 and extends it through the end of 2021. The employee retention credit was originally enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and it allows eligible employers to claim a credit for paying qualified wages to employees.

Under the act, the employee retention credit would be allowed against the Sec. 3111(b) Medicare tax.

Section 9651 of the ARPA adds new Section 3134 to the Internal Revenue Code (IRC) creating an employee retention credit (ARPA ERC), which is fundamentally an extension of the employee retention credit that was created by the CARES Act (CARES ERC) and later enhanced and extended by the Consolidated Appropriations Act, 2021 (CAA). The ARPA ERC extends the enhanced CARES ERC through the end of 2021 (the CAA had previously extended the credit through June 30, 2021). Like the CARES ERC, the ARPA ERC provides a credit against payroll taxes based on qualified wages paid by an eligible employer.

The ARPA ERC makes the following modifications to the credit, which apply prospectively to credits claimed for the third and fourth calendar quarters of 2021:

While the credit continues to be refundable, it is now a credit against the employer's 1.45% share of the Hospital Insurance tax (i.e. the Medicare tax), rather than a credit against the employer's share of the Old Age, Survivors, and Disability Insurance tax (i.e., the Social Security tax).

As under the CARES ERC, employers become eligible by experiencing (1) a full or partial suspension of operations due to certain COVID-19-related governmental orders or (2) a significant decline in gross receipts. The ARPA ERC adds a third path to eligibility for a recovery startup business (RSB). An RSB is an employer that does not qualify under either of the first two eligibility gateways and commenced a trade or business after February 15, 2020, for which the average annual gross receipts over a three-year lookback period (prorated for periods less than three years) do not exceed $1 million. While eligible employers generally are limited to a credit of $7,000 per employee per quarter, an RSB is limited to a total credit of $50,000 per quarter for all employees.

In defining qualified wages, the ARPA continues to distinguish between large employers that averaged more than 500 full-time employees during 2019 (2020 if the employer did not exist in 2019), and small employers under this threshold. For large employers, qualified wages continue to be wages paid to an employee who is not providing services due to the circumstances that caused the employer to be eligible for the credit. For small employers, the slightly modified qualified wages definition includes wages paid — without regard to whether the employee was providing services — during (1) the suspension period or (2) the calendar quarter for which the gross receipts test was met. Additionally, ARPA ERC modifies what constitutes qualified wages for a "severely financially distressed" employer that experienced a greater than 90% decline in gross receipts. For such an employer, whether a large or small employer, qualified wages include any wages paid during the calendar quarter.

The statute of limitations period for IRS assessment is extended from three years to five years.

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