Safe harbor is now available that allows employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC). These amounts are:
An employer elects to apply the safe harbor by excluding these amounts solely for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return.
The safe harbor should be applied consistently to determine eligibility for the ERC. Employers must exclude the amounts from their gross receipts for each calendar quarter in which gross receipts are relevant to determining eligibility to claim the ERC. Furthermore, the employer claiming the credit must also apply the safe harbor to all employers treated as a single employer under the aggregation rules.
Employers claim the ERC on their employment tax return, generally Form 941, Employers Quarterly Federal Tax Return, or adjusted employment tax return, generally Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.
Please note that an employer is not required to apply this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.
Further changes may be forthcoming pending legislation; however, if you have any questions or would like more information about the latest guidance regarding the ECR, don’t hesitate to call the office now.
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.