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applies to the ERC as enacted by the 2021-20 continue to apply for 2021 with the employer anymore or may
CARES Act and in effect from March where the 2020 and 2021 provisions have difficulty getting old records.
12, 2020, to Dec. 31, 2020. The docu- are the same. Thus, the documenta- Should an employer’s paid leave
mentation called for includes: tion requirement laid out in Notice credits be examined and denied due
■ Any governmental order suspending 2021-20 applies for all periods that the to lack of the specific documents and
the employer’s business operations. ERC was in effect. statements called for in FAQs, an
■ “Any records the employer relied As with the paid leave credit, ERC argument should be made that the
upon to determine whether more records should be kept for four years FAQs are not binding and that Sec.
than a nominal portion of its (six years for the ERC as extended and 6001 applies.
operations were suspended due to modified by ARPA (Sec. 3134(l)) and For the ERC, the documentation
a governmental order or whether a the Infrastructure Investment and Jobs requirement is in a notice that is bind-
governmental order had more than Act, P.L. 117-58, for wages paid in the ing guidance from the IRS. Again,
a nominal effect on its business third quarter of 2021). employers and their tax advisers will
operations.” have greater confidence they calculated
■ Records supporting the decline Observations and reminders for the ERC properly and less concern
in gross receipts (if this eligibility clients if they are examined if they have the
requirement is used rather than the Sec. 6001 provides that taxpayers are documentation for all quarters they
government order requirement). to keep records as rules and regula- claimed it.
■ Records showing which employees tions specify and to support their tax Finally, guidance on COVID-19
received qualified wages and the liability. Regs. Sec. 1.6001-1(a) calls law changes continues to emerge, so
amounts. For large employers, these for maintaining permanent books or be sure to monitor FAQs and official
records need to show wages paid for records “sufficient to establish the guidance for any new requirements. In
the employees not working. amount of … credits.” For the paid addition, the Infrastructure Investment
■ Support for how allocable qualified leave credits and the ERC, documents and Jobs Act eliminated the ERC for
health plan expenses were computed supporting eligibility and the amount most employers for the last quarter
for the ERC. of the credits seem appropriate for Sec. of 2021.
■ Copies of Forms 941 and 7200. 6001 purposes. From Annette Nellen, Esq., CPA,
Notice 2021-23 provides guidance However, for the paid leave credits, CGMA, San José, Calif. ■
for the ERC as it applied for the first what if an employer does not have the
six months of 2021. Compared with written statements and related sup-
Notice 2021-20, it includes much less port from employees, but, instead, the
information on required documenta- employer obtained that information
tion. Its single paragraph on the verbally? This is contrary to what the
topic states: FAQs require for the paid leave credits.
However, the FAQs are not bind- Contributors
Eligible employers must maintain ing law.
Valrie Chambers, CPA, Ph.D., is an asso-
documentation to support the de- The best approach for employers
ciate professor of accounting at Stetson
termination of the decline in gross and their tax advisers is to be sure all
receipts, including which calendar the support noted by the IRS is avail- University in Celebration, Fla. Timothy
Burke, CPA, J.D., LL.M., has a practice,
quarter an eligible employer elects able. It is likely, given that IRS infor-
Burke and Associates, in Braintree, Mass.
to use in measuring the decline. An mation was released after the start date
Annette Nellen, Esq., CPA, CGMA, is a
election to use an alternative quarter of the credits, and business operations
professor in and director of the MST Pro-
to calculate gross receipts is made and lives were disrupted by the pan-
gram at San José State University in San
by claiming the employee reten- demic, that employers who claimed the
José, Calif., and a past chair of the AICPA
tion credit for the quarter using paid leave credits do not have all the
Tax Executive Commmitte. Mr. Burke and
the alternative quarter to calculate written details needed from employees.
Prof. Nellen are members of the AICPA
gross receipts. If you are unsure if these records exist,
Tax Practice & Procedures Committee.
it is a good idea to remind clients
For more information on this column, con-
Despite this brevity, Notices sooner rather than later (such as during
tact thetaxadviser@aicpa.org.
2021-23 and 2021-49 include state- an IRS audit) of the need for them, as
ments that the rules included in Notice the employees might not be working
www.thetaxadviser.com January 2022 39