By Tammy Maguire, Principal Updates to the Employee Retention Credit (ERC) were issued by the IRS on Wednesday, August 4, 2021 in Notice 2021-49. The updates focus on the third and fourth quarter ERC calculations. A significant change to the program is the credit is only eligible on the employer portion of Medicare tax; the employer share of Social Security has been removed. The two main qualifying factors remain unchanged:
- A business whose trade or business’s operations were fully or partially suspended due to governmental authority limiting due to COVID-19; or
- A business whose revenue has declined by more than 20% in a calendar quarter 2021 vs. 2019.
The Notice expands the eligible employers to include recovery startup businesses. A recovery startup business is further defined as:
- An employer who is otherwise not eligible based on previous first two qualifying factors;
- Business commenced after February 15, 2020;
- Average annual gross receipts is no more than $1M for the three taxable years preceding the quarter in which the credit is claimed.
- To determine, the taxpayer would annualize revenue for whatever timeframe the business was in operation.
The calculation of the credit will remain at 70% of eligible wages up to $10,000 (maximum credit of $7,000); however, there is a quarterly credit limit of $50,000 for a recovery startup business.
If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at firstname.lastname@example.org.