Tax News & Views Expanding Employee Retention Credit Roundup

May 11, 2020

House Bill Aims to Expand Employee Retention Tax CreditAlexis Gravely, Tax Notes ($). “A bipartisan bill that would boost the employee retention tax credit (ERTC) has been introduced in the House, as the U.S. unemployment rate reaches its highest level since the Great Depression.”

The Jumpstarting Our Businesses’ Success (JOBS) Credit Act of 2020 would increase the credit from 50 percent to 80 percent of qualified wages and increase the per-employee limitation to $15,000, among several other provisions.

The refundable credit established by the Coronavirus Aid, Recovery, and Economic Security (CARES) Act (P.L. 116-136) currently covers wages up to $10,000 per employee.

The bill, introduced May 8, would also redefine a large employer as a business with more than 1,500 employees, instead of more than 100 employees. The change would expand the wages that qualify for the credit. While all wages paid by an employer with 100 or fewer full-time employees qualify for the credit, large employers can only claim wages paid when an employee isn’t providing services.

Additional information on the Employee Retention Credit can be found here and here.


Tax 101: Expenses Reimbursed With COVID-19 Aid Should Not Be Deductible – Steven M. Rosenthal, TaxVox. “Legally, Mnuchin and the IRS are correct: Expenses that are reimbursed by the government, tax-free, are not deductible in computing taxable income.  As a matter of public policy, they also are correct:  allowing businesses to deduct expenses that are reimbursed by the federal government, tax-free, is costly and perverse. Overly generous relief rewards savvy, well-connected, businesses and crowds out relief for others, undercutting the effectiveness of Congress’ aid.”

Delayed Filing, Payments Help Plunge Federal Budget Into the Red – William Hoffman, Tax Notes ($). “Delaying federal tax return filing and payment deadlines to cope with the coronavirus emergency contributed to a 55 percent decline in individual income and payroll tax collections in April compared with a year ago.”

AICPA Presses IRS, Treasury to Tweak Estates’ 199A Calculation – Jonathan Curry, Tax Notes ($). “The AICPA urged the IRS and Treasury in a May 8 letter to clarify their final section 199A regs (T.D. 9847) to provide that indirect expenses, such as costs associated with the administration of a trust or estate, should not reduce a trust or estate’s qualified business income (QBI) deduction calculation.”

Higher Ed Pleased With IRS Answer on Emergency Grants – Fred Stokeld, Tax Notes ($). “The tax-free status of the emergency grants is welcome news to organizations representing colleges and universities, who have said that taxing the aid would harm the very students it’s supposed to help.”

Emergency grants authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) to help students afford food, housing, childcare, and other necessities during the crisis are qualified disaster relief payments under section 139, the IRS said in a May 6 FAQ. Therefore, the payments aren’t includable in a student’s gross income.

The IRS also said that because the aid is excluded from gross income, a student may not claim a deduction or credit for expenses paid with the grant, including the tuition and fees deduction, the American opportunity tax credit, and the lifetime learning credit.


Feds Announce First Arrests In Country Linked To PPP Loan Fraud – Kelly Phillips Erb, Forbes. “According to court documents, the fraudulent loan requests were to pay employees of businesses that were not operating before the start of the COVID-19 pandemic and had no salaried employees.”

Alabama, Missouri Bills Would Exempt CARES Relief from Income Tax Calculation – Janelle Cammenga, Tax Foundation. “The Alabama Senate is considering legislative language (a substitute to the previously introduced SB 250 tax reform bill) which would exclude the rebate checks provided under the CARES Act from being taxed and exclude it from state income tax calculations. While those two phrases might sound redundant, they are both important in light of the fact that Alabama offers an income tax deduction for federal taxes paid. Missouri, another state with federal deductibility, is considering a similar bill amendment.”

May 13 at noon is deadline to give IRS info for direct deposit of COVID-19 money – Kay Bell, Don’t Mess With Taxes. “even though the IRS has completed almost 87 percent of the expected 150 million COVID relief payments it's been tasked with distributing, the agency is still encouraging folks who've yet to get their money to do so via direct deposit. But you need to do so by noon on May 13.”

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