For Atlanta businesses hit hard by the pandemic, the COVID-19 relief programs available through the Small Business Administration (SBA) have provided a desperately needed lifeline. This reality is reflected in the data which shows just how many businesses and organizations received financial assistance. Since the Paycheck Protection Program and Restaurant Revitalization Fund are now closed, many are looking towards the Employee Retention Tax Credit (ERTC) for additional relief. However, due to certain accounting rules forgiven PPP loan amounts are required to be counted under gross receipts. This artificially inflates that value and makes it difficult to show the required decline in gross receipts has occurred. To address the issue, the IRS recently published Revenue Procedure 2021-33 which creates a Gross Receipts Safe Harbor program. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key program details below.
The new safe harbor allows an employer to exclude the amount of a forgiven PPP loan and ERC Coordinated Grants from the calculation of gross receipts when determining credit eligibility. The safe harbor is an optional tool available to employers that may otherwise be excluded from leveraging the credit. It is important to note the safe harbor does not allow the exclusion of the forgiven loan or grant amount from gross receipts for federal tax purposes.
When electing to use the new safe harbor an employer is required to consistently apply it. This means that an employer is required to exclude the amount of forgiveness from gross receipts and apply the safe harbor to all employers treated as a single employer under aggregation rules. There is no requirement to make a special submission with the IRS to use the new safe harbor. The adjusted calculation simply needs to be made when determining eligibility.
The savings available through the Employee Retention Credit can be significant and provides an additional dimension of savings. Given the complexity of the regulations, it is important to consult with a qualified advisor to guide you through the process. If you have questions about the new safe harbor, or need assistance claiming the ERTC, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.
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