TAXFAX EDITOR George W. Benson Counsel McDermott Will & Emery LLP 444 West Lake Street Suite 4000 Chicago, IL 60606 (312) 984-7529 fax: (312) 984-7700 gbenson@mwe.com
Employee Retention Credit By Tara Guler The CARES (“Coronavirus Aid, Relief, and Economic Security”) Act enacted in March of 2020 provided various benefits for employers to retain their current employees amid the economic downturn of the pandemic. The Employee Retention Credit (“ERC”) was first introduced in this Act. In December of 2020, the ERC was modified under the Consolidated Appropriations Act (“CAA”), which made significant taxpayer friendly changes. Specifically, the CAA provided retroactive changes to the ERC (allowing Payroll Protection Program (“PPP”) recipients to also claim the ERC) and extended the ERC into the first two quarters of 2021. Not long after, Congress extended and expanded the ERC a second time with the passage of the American Rescue Plan Act (“ARPA”), extending the ERC through December 31, 2021. Outside of the legislative language, guidance on the ERC can be found in IRS Notices 2021-20, 2021-23 and 2021-24. The ERC is a refundable payroll tax credit claimed on Form 941 and is calculated as a percentage of qualified wages. In order to be eligible for the ERC, an employer must 11
have been GUEST WRITER subject to a Tara Guler full or partial Senior Manager Baker Tilly Virchow Krause, LLP closure due to Ten Terrace Court a government Madison, WI 53718 order or Tel: (608) 240-6714 Fax: (608) 249-8532 experienced e-mail: tara.guler@bakertilly.com a significant decline in gross receipts. Exactly what can be treated as qualified wages hinges on whether the employer is a large or a small employer. Determination of eligibility and qualified wages can appear to be a simple on its face, but the rules are often vague, complex, and heavily facts and circumstances based, requiring employers to dig into the details to determine if they are truly entitled to a credit. Aggregated group The existence of an aggregated group can have a considerable impact on an employer’s entitlement to the ERC. As such, before testing the employer’s eligibility and size, the employer must first determine if they are part of an aggregated group. For purposes of the ERC, employers are generally aggregated Fall 2021 | The Cooperative Accountant
