On August 4, 2021, the IRS issued Notice 2021-49 which addresses changes made by the American Rescue Plan Act of 2021 (ARP) to the ERC wages paid after June 30, 2021, and before January 1, 2022 as well as additional guidance on miscellaneous issues that apply to the ERC in both 2020 and 2021.

Some of the items covered include:

• Additional guidance on claiming the ERC for qualified wages in the third and fourth quarters of 2021
• Expanding the definition of eligible employer to include “recovery startup businesses”
• Modifying the definition of qualified wages for “severely financially distressed employers”
• Providing guidance on several miscellaneous issues such as:
  • The definition of full-time employees and if full-time equivalents are included when determining whether an eligible employer is a large or small eligible employer
  • Whether wages paid to employees who are not full-time may be treated as qualified wages

The ERC is claimed against employer payroll taxes on the Form 941 for the applicable calendar quarters. If a reduction in the employer’s employment tax deposits is not sufficient to cover the credit, employers may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Updates on the implementation of the employee retention credit, and other information can be found on the Coronavirus page of IRS.gov.