ERC Updates to know
Just a few quick updates about the 2021 Employee Retention Credit (ERC):
2021 Quarter 4 ERC may be eliminated: The infrastructure bill passed by the Senate today includes a repeal of ERC for the 4th Quarter (Oct-Dec 2021). There are scenarios where the bill doesn’t go into law or the ERC section is amended, but for now, don’t count on getting ERC in Quarter 4 (and you won’t know for sure until late fall most likely). Note that I have not updated my previous posts which include the ERC for Quarter 4. I’ll do so when the repeal becomes law.
The most recent guidance from the IRS confirms that in determining your eligibility for ERC, you can use the gross receipts test for either the current quarter or the preceding quarter - and you don’t need to be consistent from quarter to quarter. This means that if you are down 20% in gross receipts in Quarter 2, for example, you will be able to use that quarter to claim the ERC in both Quarter 2 and Quarter 3. This guidance is consistent with what I have written previously, but some had been concerned that the IRS would be more restrictive. As I have advised, if you are/were able to manage your revenue in order to qualify in Quarter 2, all of your camp salaries could be subsidized by ERC in both Quarters 2 and 3.
A reminder that you have 2 years to submit a 941x claiming the ERC. I strongly advise that you wait until the fall after you figure our your PPP forgiveness, and then submit the remaining eligible payroll for ERC via a 941x. I will be holding a zoom clinic in September to walk you through how to make sure both your PPP and ERC are maximized.
Feel free to email with any questions or clarifications. Hope everyone has had a great summer season.