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May 11, 2020

IRS Alters Rules For Employee Retention Tax Credit

The U.S. Internal Revenue Service (IRS) last week issued a new Frequently Asked Questions (FAQ) document for its Employee Retention Tax Credit (ERTC) program. Importantly, the IRS said it would not prevent employers that provide health care benefits for furloughed workers from qualifying for the credit.

This credit, which cannot be used if employers receive a U.S. Small Business Administration Paycheck Protection Program (PPP) loan, provides a temporary refundable payroll tax credit for “eligible employers” affected by COVID-19.

An eligible employer is an entity whose operation either is fully or partially suspended in response to governmental orders limiting commerce, travel or group meetings or that has experienced a significant decline in gross receipts, defined as a decline of 50 percent or more in quarterly receipts when compared to the prior year quarter. The credit is 50 percent on the first $10,000 of wages (including health benefits). Last week, the U.S. Treasury Department also said that if a company received a PPP loan, but returns it by May 14, 2020, the company will be eligible to take the ERTC. Click here to read more about that decision.

The U.S. Chamber of Commerce’s guide to the ERTC is here.