August 4, 2021

The Internal Revenue Service issued further guidance on the employee retention credit, including guidance for employers who pay qualified wages after June 30, 2021, and before January 1, 2022, and additional guidance on miscellaneous issues that apply to the employee retention credit in both 2020 and 2021.

Notice 2021-49 addresses changes made by the American Rescue Plan Act (ARP) to the employee retention credit that are applicable to the third and fourth quarters of 2021. Those changes include, among other things: (1) making the credit available to eligible employers that pay qualified wages after June 30, 2021, and before January 1, 2022;  (2) expanding the definition of eligible employer to include “recovery startup businesses”; and (3) modifying the definition of qualified wages for “severely financially distressed employers”.

The notice also provides guidance on several miscellaneous issues with respect to the employee retention credit for both 2020 and 2021. This guidance responds to various questions that the Treasury Department and the IRS have been asked about the employee retention credit, including, among others, the definition of full-time employee and whether that definition includes full-time equivalents.

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