Section 80604 of the bipartisan Infrastructure Investment and Jobs Act (H.R. 3684) amends Section 3134 of the Internal Revenue Code to terminate the employee retention credit for employers subject to closure for COVID-19 effective October 1, 2021. The legislation, which passed the House on November 5 (after passing the Senate on August 10), was presented
IRS Issues Additional Guidance on Employee Retention Credit
Nearly 18 months into the pandemic, the IRS continues to issue guidance on the employee retention credit, a credit that was adopted in March 2020 and has been addressed in a number of articles on the Tax Withholding & Reporting Blog, most recently on August 3, 2021.
The latest guidance takes the form of Notice 2021-49 and Revenue Procedure 2021-33, which together address a range of topics, including how employers should treat cash tips for purposes of determining the amount of qualified wages, whether the credit may be claimed with respect to the same wages for which the employer receives the Code Section 45B credit, how the related individual rules work for determining qualified wages, and whether employers are required to file amended tax returns if they claim the employee retention credit retroactively. The Service has also outlined a safe harbor that employers may apply to exclude from gross receipts the amount of the forgiveness of any PPP loans or the amount of shuttered venue operator grants or restaurant revitalization grants.
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Bipartisan Infrastructure Bill Would Terminate Retention Credit Early for Most Employers
The bipartisan infrastructure bill introduced in the Senate earlier this week includes a provision that would end early the employee retention credit, which was codified in Section 3134 of the Internal Revenue Code by the American Recovery Plan Act earlier this year. The Section 3134 credit, which took effect on July 1 but mirrors the
Supreme Court Denies New Hampshire’s Challenge to Massachusetts Telecommuter Tax Rule; Convenience of the Employer Lives to See Another Day
The Supreme Court, today, denied New Hampshire’s motion for leave to file a bill of complaint challenging Massachusetts’ COVID-related tax regulations. The decision comes little more than a month after the Acting Solicitor General of the United States filed an amicus brief urging the court to deny the motion. In addition to New Hampshire, the decision will leave New Jersey and other states (nearly fourteen states had filed amicus briefs urging the Court to take the case) disappointed. The case was seen as an indirect threat to New York’s convenience of the employer rule, which operates similarly to the temporary regulations adopted by Massachusetts. See earlier coverage here and here.
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Making a Point: Tax Court’s Anikeev Decision Challenges Longstanding IRS Policy on Credit Card Rewards
In February, a U.S. Tax Court opinion in Anikeev v. Commisioner addressed challenging issues regarding the IRS’s existing policy with respect to the taxation of credit card rewards and other rebates. The case involves Mr. and Mrs. Anikeev, each of whom held a Blue Cash American Express Card (“Blue Card”) during 2013 and 2014, on which they accumulated a substantial amount of reward dollars through the use of their cards. At issue in Anikeev is whether the reward dollars were taxable income to the Anikeevs. Basing its decision on longstanding IRS policy, the court determined that the overwhelming majority of the rewards were not taxable to the Anikeevs, although the decision does address how the Service could potentially reform its policy regarding credit card rewards to prevent the same result in the future.
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American Rescue Plan Act Clarifies Scope of Form 1099-K Reporting and Reduces De Minimis Threshold
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the “ARPA”) into law. The ARPA includes clarifying language regarding the scope of Form 1099-K (Payment Card and Third Party Network Transactions) reporting for third party payment networks and a change to the de minimis reporting standard applicable to third party settlement organizations (“TPSOs”) effective for returns required to be filed for 2022.
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A Look at IRS Guidance on the Employee Retention Credit: Part III—The IRS Seeks to Close the Barn Door
Almost a year after the employee retention credit was adopted as part of the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”), and nearly a month after the final Form 941, Employer’s Quarterly Federal Tax Return, claiming the credit for 2020 was due, the IRS issued Notice 2021-20 (the “Notice”). This is the final article in our three-part series looking at how the IRS’s guidance on the employee retention credit has changed over the past ten months. This article focuses on how Notice 2021-20 builds on previous IRS guidance to narrow the scope of the credit and limit its availability. Part I focuses on the statute and approach the IRS took in interpreting statute when the IRS issued frequently asked questions (“FAQs”) in April 2020. Part II focuses on the initial signs of trouble for employers that first appeared in the updated FAQs in June 2020.
The Notice is the proverbial effort to close the barn door after the horse is out of the barn–and in this case, clear across the pasture. Although much of the guidance in the Notice reflects the (“FAQs”) that were posted to the IRS website beginning last April and that have been revised multiple times since, the Notice continues the trend that began last June of narrowing the availability and the amount of the employee retention credit—and in some instances, narrowing it in a way not contemplated by the permissive statutory language. (For our complete coverage of the employee retention credit and IRS guidance, click here.)
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American Rescue Plan Act Goes to Biden for Signature: Includes Changes to Employee Retention Tax Credit, Employer-Provided Dependent Care, Paid Leave Credits, and Deduction Limitations for Executive Compensation
On March 10, 2021, the House passed the fifth major COVID-relief legislation, the American Rescue Plan Act (the “Act”), which it originally passed last week before its amendment and passage by the Senate on March 6. President Biden is expected to sign the Act on Friday, March 12, 2021.
The Act adopts a new payroll tax credit that is similar to the employee retention credit, which was originally enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and amended by the Consolidated Appropriations Act, 2021 (the “CAA”). The new credit will be in effect from July 1, 2021, through December 31, 2021. In addition, the Act significantly increases the exclusion for employer-provided dependent care assistance for 2021, and makes prospective changes to extend the availability of paid leave credits similar to those originally adopted as part of the Families First Coronavirus Response Act (the “FFCRA”) and that are set to expire on March 31. Finally, the Act will extend the deduction limitation under section 162(m) to additional employees.
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A Look at IRS Guidance on the Employee Retention Credit: Part II—June Revisions Signal Potential Trouble Ahead
Almost a year after the employee retention credit was adopted as part of the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”), and nearly a month after the final Form 941, Employer’s Quarterly Federal Tax Return, claiming the credit for 2020 was due, the IRS issued Notice 2021-20 (the “Notice”), providing guidance on
Notice 2021-20 Limits Employee Retention Credit For Many PPP Borrowers
Recently released IRS Notice 2021-20 (the “Notice”) provides guidance on the interaction between the Paycheck Protection Program (“PPP”) and the employee retention credit. Unfortunately, the Notice may limit the ability of many PPP borrowers to claim an employee retention credit that employers may have believed they would be entitled to claim.
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