Updated Resources and Guidance from the IRS

Guidance for employers claiming the Employee Retention Credit for first two quarters of 2021

IRS Notice 2021-23 (click here) provides guidance for employers claiming the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act).

It explains the changes to the Employee Retention Credit for the first two calendar quarters of 2021, including:

  • 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
  • Restrictions on the ability of eligible employers to request an advance payment of the credit

Click here for a IRS news release for more details about claiming the credit for the first and second quarters of 2021.

Note: Under the American Rescue Plan Act of 2021, enacted March 11, 2021, the Employee Retention Credit is also available to eligible employers for wages paid during the third and fourth quarters of 2021. The IRS will provide further guidance on claiming these credits soon. 

Relief from penalty for failure to deposit employment taxes

Notice 2021-24 (click here) provides additional guidance for penalty relief under section 6656 of the Code for an employer’s failure to timely deposit employment taxes with the IRS.

This relief ensures that such employers may pay qualified sick leave wages and qualified family leave wages, qualified wages, and COBRA continuation coverage premiums using employment taxes that would otherwise be required to be deposited without incurring a failure to deposit penalty.