Accountant Group Seeks Clarity on Employee Retention Tax Credit

The IRS should provide more guidance to help businesses take advantage of a new tax perk meant to encourage them to keep employees on their payroll during the coronavirus pandemic, a major accountant organization said.

The American Institute of CPAs in a news release Monday said it has made seven recommendations for additional guidance to the IRS in a letter dated April 17. One recommendation requests clarification on whether a portion of an employee’s wages and qualified health care costs can be claimed as a credit in situations where the employee works a reduced schedule but continues to be paid his or her regular wage.

• Congress created the employee retention credit under a recent coronavirus relief law (Public Law 116-136). The refundable tax credit is equal to 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by Covid-19.
• The IRS has a series of FAQs on its website to answer basic inquiries about the tax break but the AICPA in its letter said more clarity is needed.
• “AICPA’s recommendations will provide more direction and support for small businesses and their employees so they can concentrate on resuming operations to assist in the revitalization of the economy,” Edward Karl, the group’s vice president of taxation, said in a statement.
• The IRS didn’t immediately respond to a request for comment.