Double Dipping Opportunities for RRF and SVOG Recipients Claiming the Employee Retention Credit

When additional Employee Retention Credit (ERC) guidance was provided in March 2021, the Notices clarified wages utilized for Paycheck Protection Program (PPP) loan forgiveness are not eligible for the ERC.

We assumed this double dipping prohibition would extend to post-CARES Act COVID relief programs, such as the Shuttered Venue Operator Grants (SVOG) and the Restaurant Revitalization Fund (RRF). However, Notice 2021-49 provides guidance that indicates otherwise.

RRF and SVOG Wage Double Dipping Permitted for 2020 and 2021 Q1 and Q2

For RRF and SVOG recipients, coordination between these and the other COVID programs (PPP,

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Filed Your 2020 Tax Return Already? An Amended Return May Be Required If You Claimed a 2020 Employee Retention Credit.

The IRS recently released Notice 2021-49, providing long awaited guidance on many aspects of the Employee Retention Credit (ERC). One aspect relates to the timing of the wage disallowance for ERC claims.

In FAQs issued by the IRS in 2020 and reiterated earlier this year in Notice 2021-20, employers that claim an ERC must reduce their wage expense and health plan expenses (if appliable) on their income tax returns by the employee retention credit amount. However, the timing of this reduction was uncertain – is it in the year the amounts were paid or the year which the ERC claim is filed?

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Gross Receipts for Employee Retention Credit Does NOT Include Certain COVID Relief Funds

Revenue Procedure 2021-33, issued by the IRS on August 9, 2021, now answers one of our biggest Employee Retention Credit (ERC) questions: Are Paycheck Protection Program (PPP) loans included in gross receipts for ERC eligibility? Based on this guidance, the answer is NO.

ERC Eligibility Refresher

As a reminder, an employer is eligible for the ERC through one of three ways during 2021:

  1. A full or partial suspension of operations due to a government order;
  2. A gross receipts decline of over 20% when compared to the same quarter in 2019; or
  3. Qualification as a Recovery Startup Business (2021 Q3 and Q4 only).

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Your Top Employee Retention Credit Questions Answered in Recent IRS Guidance

In early August, the IRS issued two pieces of guidance on the Employee Retention Credit (ERC) – Notice 2021-49 and Revenue Procedure 2021-33. This guidance includes answers to your top questions, including:

  • Whether PPP loan proceeds are included in the gross receipts calculation;
  • Whether S-corporation owners are eligible for the ERC;
  • When the ERC credit is included on your income tax return; and
  • What method of accounting to use when calculating a decline in gross receipts.

Also included is a new provision that allows for double dipping on wages for recipients of Shuttered Venue Operator Grants and Restaurant Revitalization Fund Grants.

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