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IRS Releases New Employee Retention Credit Guidance in Response to Passage of the December 2020 COVID-19 Relief Bill

The Internal Revenue Service (IRS) issued new guidance for employers claiming the employee retention credit created under the CARES Act, as modified by the December 2020 COVID-19 response package. The guidance in today’s Notice 2021-20 clarifies information in the previously issued employee retention credit FAQs. Among other things, it describes SWACCA-advocated retroactive changes made by the December 2020 COVID-19 response bill for employers claiming the credit in calendar quarters in 2020. 

For 2020, the employee retention credit can be claimed by employers who paid qualified wages after March 12, 2020, and before January 1, 2021, and who experienced a full or partial suspension of their operations or a significant decline in gross receipts. The credit is equal to 50 percent of qualified wages paid, including qualified health plan expenses, for up to $10,000 per employee in 2020. The maximum credit available for each employee is $5,000 in 2020. SWACCA successfully advocated for language in the December 2020 COVID-19 response package permitting eligible employers that received a Paycheck Protection Program (PPP) loan to also claim the employee retention credit.  Today’s notice explains this important change and clarifies that the same wages cannot be counted both for seeking forgiveness of a PPP loan and calculating the employee retention credit. Today’s IRS Notice also details when and how employers that received a PPP loan can claim the employee retention credit for 2020.

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