IRS Guidance for Employers Claiming the Employee Retention Credit for 2020

This week, the Internal Revenue Service issued guidance for employers claiming the employee retention credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), for calendar quarters in 2020.

 The guidance in Notice 2021-20 PDF includes clarifications and describes retroactive changes under the new law applicable to 2020, primarily relating to expanded eligibility for the credit.

 One of the most significant changes to the new law applicable to 2020 is that the Relief Act permits eligible employers that received a Paycheck Protection Program (PPP) loan to claim the employee retention credit. Notice 2021-20 explains when and how employers that received a PPP loan can claim the employee retention credit for 2020.

 Notice 2021-20 also provides answers to questions such as: who are eligible employers; what constitutes full or partial suspension of trade or business operations; what is a significant decline in gross receipts; how much is the maximum amount of an eligible employer's employee retention credit; what are qualified wages; how does an eligible employer claim the employee retention credit; and how does an eligible employer substantiate the claim for the credit.