On Wednesday, the IRS released extensive new guidance in the form of frequently asked questions (“FAQs”) on the IRS website addressing various aspects of the employee retention credit. This is the third in a series of articles addressing various aspects of these FAQs. This article addresses the determination of qualified wages and allocable qualified health plan expenses. Our first article discussed the IRS’s interpretation of the aggregation rules under section 2301(d) of the CARES Act and the determination of employer eligibility based on a full or partial suspension of operations due to a government order. Our second article focused on employer eligibility for the credit based on a significant decline in gross receipts. Subsequent articles will address issues related to the income and deduction treatment of qualified wages for employees and employers and issues related to the use of third-party payers. Before the release of the IRS FAQs, we addressed how employers can claim the employee retention credit and its interaction with the deferral of employer social security tax deposits (see earlier article).
Although employers should carefully consider the FAQs, they should be mindful that these FAQs are not binding guidance but instead represent the current thinking of the IRS on the employee retention credit.