The IRS has released additional guidance in Notice 2021-20 on the Employee Retention Tax Credit (ERC) with clarifications on the retroactive changes for expanded eligibility applicable to 2020. Employers who received a Paycheck Protection Program (PPP) loan have been waiting on guidance on claiming the credit in combination with forgiveness of their loan. The provisions outlined here apply to retroactive claims for 2020 as well as providing a plan for those yet to seek forgiveness.
As a reminder, eligibility to claim the 2020 ERC requires a business to have experienced a significant decline in revenues during 2020. Specifically, gross receipts for a calendar quarter during 2020 must have declined by 50% or more when compared to the same calendar quarter in 2019. Additionally, a company is eligible during any period where operations were suspended due to a government order.
The notice clarifies when and how PPP borrowers can claim the ERC on 2020 wages.
The ERC requires specific documentation and support of facts and circumstances in order to qualify and receive the credit. For assistance with claiming the ERC, contact us.
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