The Internal Revenue Service (“IRS”) issued Notice 2021-23 on April 2, 2021, for employers claiming the employee retention tax credit (the “ERTC”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Relief Act”). Specifically, Notice 2021-23 clarifies rules for employers claiming ERTCs for wages paid after December 31, 2020 through June 30, 2021, and expands on prior guidance provided by the IRS in Notice 2021-20.
As we have previously discussed, Notice 2021-20 formalized much of the informal guidance on the application of ERTCs that was issued by the IRS via FAQs over the course of 2020. However, Notice 2021-20 only applied to ERTCs claimed for wages paid in 2020 despite extension of the ERTC program through June 30, 2021, under the Relief Act. Notice 2021-23 amplifies Notice 2021-20 and explains the changes to the ERTC for the first two calendar quarters of 2021 pursuant to the Relief Act.
Notice 2021-23 provides the following key rules for the ERTC program for wages paid after December 31, 2020 through June 30, 2021:
In addition to the specific issues discussed above, Notice 2021-23 includes further discussion of the rules for ERTCs claimed for the first two calendar quarters of 2021.
Despite the extension of the ERTC through the third and fourth quarters of 2021 under the American Rescue Plan Act of 2021 (the “Rescue Plan Act”), Notice 2021-23 does not apply to ERTCs for wages paid during the third and fourth quarters of 2021, and the IRS will issue further guidance for such periods.
Thompson Coburn LLP continues to monitor these important developments in the CARES Act and other Federal relief efforts.
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