The notice from the IRS provides additional guidance on the employee retention tax credit, which was created by the Coronavirus Aid, Relief and Economic Security Act and gives tax credits to certain employers that had businesses partly or completely shut down or that faced a significant decline in gross receipts because of the coronavirus pandemic. Specifically, the guidance addresses changes made to the credit for 2021 by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which passed along with a year-end spending bill in December 2020 and extended the credit through June 2021.
Higher-education institutions and hospitals may qualify for the credit for the first two quarters of 2021 because of changes to the law, the IRS said in its Friday notice. The agency also said that employers must keep records proving that they experienced declines in gross receipts that would entitle them to the credit.
The IRS on March 1 clarified how employers who received Paycheck Protection Program loans can claim the tax credit for 2020, which the year-end spending bill increased to a maximum of $14,000 for the first and second quarters of 2021 combined.
The IRS said it will provide guidance in the future on the employee retention credit and the American Rescue Plan Act of 2021. That legislation extended the credit through the end of the year.
--Editing by Vincent Sherry.
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