Safe Harbor

The IRS and Department of Treasury issued a safe harbor to employers, permitting them to exclude certain amounts from gross receipts solely for determining eligibility for the Employee Retention Credit (ERC). (See Revenue Procedure 2021-33).

Exclusions

  • The Paycheck Protection Program Loan forgiveness amount
  • Shuttered Venue Operators Grants and
  • Restaurant Revitalizations Grants.

An employer makes the election by consistently excluding these amounts from gross receipts when determining eligibility for the employee retention credit. 

Eligibility for the credit

  • An employer’s 2021 quarterly gross receipts must be less than 80% of the gross receipts from the same quarter in 2019
  • An employer must determine consistently eligibility for each calendar quarter in which gross receipts are relevant (see above)
  • Eligibility is measured on a quarterly basis.  A special provision applies to allow the employer to look at the previous quarter to determine eligibility. 

Employers do not have to adopt this new safe harbor nor are they to exclude these amounts from gross receipts for any other federal tax purpose.

To Claim the ERC

Employers may claim the ERC on their employment tax return using Form 941, filing Form 7200 or using adjusted employment tax return Form 941-X.

For more information, please contact us at 401-831-0200 or visit the IRS Newsroom.

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