One more ERC update as we prepare to contact our practice owner clients with an approximation of the amount of the Employee Retention Tax Credit their practice should be eligible to receive. Earlier this month, the IRS announced that the wages of owners of more than 50% of the value of the practice won’t qualify for this credit unless the shareholder has NO living relatives.
This crazy rule was detailed in IRS Notice 21-49 available at: https://www.irs.gov/pub/irs-drop/n-21-49.pdf.
We have considered waiting for Congress to provide clarity on this most recent IRS ruling. Not allowing the wages paid to practice owners to be included in the ERC calculation reduces this valuable payroll tax credit by $5k.
Everything we have read since the IRS issued Notice 21-49 has indicated that clarifying this issue is not currently a priority to Congress. For that reason, we plan to move forward with processing the amended payroll tax forms to file for the ERC once we get approval from each of our clients. Expect to hear from us by the end of September. If the rules change, we can re-file later to request the additional $5k ERC.