KPMG report: Notice 2021-23 and employee retention credit for first two calendar quarters of 2021

Notice 2021-23 and employee retention credit

The IRS on April 2, 2021, released an advance version of Notice 2021-23 as guidance with respect to the employee retention credit for the first two calendar quarters of 2021.

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As originally enacted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the employee retention credit provides a refundable payroll credit for eligible employers, including tax-exempt organizations, whose business has been affected by the coronavirus (COVID-19) pandemic for qualified wages paid after March 12, 2020, and before January 1, 2021.

Retroactive changes were made to the employee retention credit by a provision of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (a division of the Consolidated Appropriations Act, 2021). The changes generally have an effective date of January 1, 2021.

The IRS in early March 2021 issued Notice 2021-20 to formalize and clarify previously issued information contained in a set of “frequently asked questions” (FAQs) available on the IRS website with respect to the employee retention credit for the 2020 calendar year.

Notice 2021-23 concerns the employee retention credit for qualified wages paid for the first two quarters of 2021.

When read together, Notice 2021-20 and Notice 2021-23 provide employers with information to assist in evaluating eligibility for the employee retention credit, in determining qualified wages, and for claiming the employee retention credit for 2020 and for the first two quarters of 2021.

Read an April 2021 report [PDF 389 KB] prepared by KPMG LLP that explains the guidance provided by Notice 2021-23

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