Reminder: Employee Retention Credit for Eligible Credit Unions

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As a reminder, credit unions may be eligible to claim the employee retention credit (ERC) — a fully refundable tax credit created under the CARES Act to provide financial relief to employers who kept employees on the payroll during the COVID-19 pandemic. The original rules of ERC have been modified by the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA).

In its current form, credit unions eligible for the tax credit in 2021 may receive a credit equal to 70 percent of the qualified wages that do not exceed $10,000 for any calendar quarter. Thus, the total credit per employee is limited to $7,000 per quarter.

In August, the Internal Revenue Service (IRS) released additional guidance (Notice 2021-49) on the ERC. This includes guidance for employers that pay qualified wages after June 30, 2021 and before Jan. 1, 2022, and guidance on miscellaneous issues that apply to the ERC in both 2020 and 2021.

Additionally, the IRS issued a safe harbor allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the ERC. For purposes of the ERC, qualified wages are determined differently for large (more than 500 full-time employees in 2019) versus small employers (500 or less full-time employees in 2019).

Credit unions eligible for the ERC will report their total qualified wages and the related health insurance costs for each quarter on their employment tax returns, generally (Form 941 Employer's Quarterly Federal Tax Return), for the applicable period.

Credit unions are advised to consult with their tax advisor and/or payroll provider to determine if they qualify to claim the ERC. 

Click here for further information regarding the ERC.

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