On Tuesday, August 10, 2021, the Internal Revenue Service (IRS) released guidance through Rev. Proc. 2021-33 stating that businesses applying for an employee retention tax credit (ERTC) will now have a safe harbor option, which will allow them to exclude certain items from their gross receipts when determining eligibility for the program. The IRS noted that establishing this safe harbor provision was needed to ensure that funds from relief programs don’t prevent companies from qualifying for ERTC because participation in these programs resulted in a temporary spike in gross receipts.
Gross Receipts Safe Harbor
The safe harbor will allow employers to exclude the amount forgiven from a Paycheck Protection Program (PPP) loan and from pandemic relief program grants, such as the Restaurant Revitalization Fund (RRF) and the Shuttered Venue Operators Grants (SVOG). The IRS will require employers to apply the safe harbor consistently for determining eligibility for the ERTC by excluding the amounts from their gross receipts for each calendar quarter in which the receipts are relevant.
Earlier this year, the ERTC was extended through the end of the year; however, the infrastructure bill that passed the Senate on Tuesday, August 10, 2021, would terminate the program on September 30, 2021. The House of Representatives must now vote on the bill. It is important to remember that the precise amount of your ERTC will vary depending on several factors, including but not limited to your number of employees and the period chosen. The Moore Colson Tax Practice can help ensure that you correctly calculate your credit. Please contact us for more information.
Andy Starnes, CPA, is a Partner and Tax Services Practice Leader Moore Colson. Andy’s specialties include corporate tax compliance and planning, business consulting and multi-generational planning with a focus on the construction, professional services and staffing industries.