Tax Law and News IRS provides guidance for employers claiming the Employee Retention Credit for first two quarters of 2021 Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Intuit Accountants Team Modified Apr 6, 2021 2 min read The IRS has issued 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). Notice 2021-23 explains the changes to the Employee Retention Credit for the first two calendar quarters of 2021, including the following: 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. New restrictions on the ability of eligible employers to request an advance payment of the credit. As a result of the changes made by the Relief Act, eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after Dec. 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. As a result, the maximum employee retention credit available is $7,000 per employee, per calendar quarter, for a total of $14,000 for the first two calendar quarters of 2021. Employers can access the Employee Retention Credit for the 1st and 2nd calendar quarters of 2021, prior to filing their employment tax returns, by reducing employment tax deposits. Small employers – those with an average of 500 or fewer full-time employees in 2019 – may request advance payment of the credit, subject to certain limits, on Form 7200, Advance of Employer Credits Due to COVID-19, after reducing deposits. In 2021, advances are not available for employers larger than this. Further details on how to calculate and claim the employee retention credit for the first two calendar quarters of 2021 can be found in Notice 2021-23. Under the American Rescue Plan Act of 2021 (ARPA), enacted March 11, 2021, the Employee Retention Credit is available to eligible employers for wages paid during the third and fourth quarters of 2021. The U.S. Department of the Treasury and the IRS will provide further guidance on the Employee Retention Credit available under the ARPA. Additional coronavirus relief information for businesses is available on IRS.gov. Previous Post Creating an S corporation entity can reduce self-employment tax Next Post Crypto tax time: Considerations for tax year 2020 Written by Intuit Accountants Team The Intuit® Accountants team provides ProConnect™ Tax, Lacerte® Tax, ProSeries® Tax, and add-on software and services to enable workflow for its customers. Visit us at https://proconnect.intuit.com, or follow us on Twitter @IntuitAccts. More from Intuit Accountants Team Comments are closed. Browse Related Articles Tax Law and News IRS provides guidance for employers claiming the Employ… Tax Law and News New law extends COVID-19 tax credit for employers who k… Tax Law and News Employee Retention Credit: key benefit for small busine… Tax Law and News Guidance issued on employer deferral of withholding and… Tax Law and News New COVID-19 relief package passed Tax Law and News Recent Tax-Favored Treatment for Small Business Tax Law and News 7 warning signs ERC claims may be incorrect Practice Management Warning signs of ERC scams Tax Law and News Advising your clients on repaying deferred payroll taxe… Tax Law and News IRS stops ERC claims through Dec. 31, 2023