May A Small Eligible Employer Treat Its Health Plan Expenses As Qualified Wages For Purposes Of The Employee Retention Credit? – #41 ERC IRS Notice 2021-20

Question #41:
May a small eligible employer treat its health plan expenses as qualified wages for purposes of the employee retention credit?

Found under the H. Allocable Qualified Health Plan Expenses section of the Employee Retention Credit (ERC) IRS Notice 2021-20 with updated guidance to help business owners follow the current ERC rules. 

The answer to question #41, May a small eligible employer treat its health plan expenses as qualified wages for purposes of the employee retention credit?, can be found below.

ERC IRS Notice 2021-20 Question #41:

H. Allocable Qualified Health Plan Expenses

May a small eligible employer treat its health plan expenses as qualified wages for purposes of the employee retention credit?

A small eligible employer may treat its health plan expenses paid or incurred, after March 12, 2020, and before January 1, 2021, with respect to any employee during any period in a calendar quarter in which the employer’s business operations are fully or partially suspended due to a governmental order or during a calendar quarter in which the employer experiences a significant decline in gross receipts as qualified wages, although only $10,000 per employee for all calendar quarters can be taken into account for the employee retention credit. Small eligible employers may treat health plan expenses allocable to the applicable periods as qualified wages even if the employees are not working and the eligible employer does not pay the employees any wages for the time they are not working.

Example 1: Employer A is a small eligible employer subject to a governmental order that partially suspends the operation of its trade or business. In response to the governmental order, Employer A reduces all employees’ hours by 50 percent. It pays wages to the employees only for the time the employees are providing services, but Employer A continues to provide the employees with full health care coverage. Employer A’s health plan expenses allocable to wages paid during the period its operations were partially suspended may be treated as qualified wages for purposes of the employee retention credit.

Example 2: Employer B is a small eligible employer subject to a governmental order that suspends the operation of its trade or business. In response to the governmental order, Employer B lays off or furloughs all of its employees (but does not treat these employees as terminated for employment tax purposes). It does not pay wages to its employees for the time they are laid off or furloughed and not working, but it continues the employees’ health care coverage. Employer B’s health plan expenses allocable to the period its operations were partially suspended may be treated as qualified wages for purposes of the employee retention credit.

For more information about the Employee Retention Credit (ERC) IRS Notice 2021-20, visit the Internal Revenue Service (IRS) Department of the Treasury, official IRS.gov tax website.

Conclusion and Summary on May a small eligible employer treat its health plan expenses as qualified wages for purposes of the employee retention credit? – #41 ERC IRS Notice 2021-20

The answer to Question #41: “May a small eligible employer treat its health plan expenses as qualified wages for purposes of the employee retention credit?” was answered in detail above. It was found under section H. Allocable Qualified Health Plan Expenses in IRS Notice 2021-20. 

Leave a comment below if you have further questions on the Employee Retention Credit (ERC) or for clarifications in May a small eligible employer treats its health plan expenses as qualified wages for purposes of the employee retention credit?

Employee Retention Tax Credit (ERTC): Expert Assistance to Claim Your Business ERC Credit 

Up to a $26,000 ERC Refund from the IRS for Each Employee

Disaster Loan Advisors can assist your business with the complex and confusing Employee Retention Credit (ERC), Form 941-X, and the Employee Retention Tax Credit (ERTC) program. 

Depending on eligibility, business owners and companies can receive up to $26,000 per employee based on the number of W2 employees you had on the payroll in 2020 and 2021.

The ERC / ERTC Tax Credit Program is a valuable IRS tax credit you can claim. This is money you have already paid to the IRS in payroll taxes for your W2 employees.

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If you are looking for an ERC Company that believes in providing professional ERC Services and value, in exchange for a fair, reasonable, and ethical fee for the amount of work required, Disaster Loan Advisors is a good fit for you. 

Schedule Your Free Employee Retention Credit Consultation to see what amount of employee retention tax credit your company qualifies for.

Cover Image Credit: Irs.gov / IRS Notice 2021-20 / Disaster Loan Advisors.

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