Each eligible employer will declare their employee retention credit on their payroll tax return (or on the payroll tax return of their third payer) regardless of their accrual with other entities such as a single employer in order to determine their eligibility for the credit. Eligible employers are entitled to an employee retention credit based on the qualified wages paid to their employees. The customer, the employer and the third party payer will each be responsible for the payroll taxes due as a result of any improper request for employee retention credits that are unduly requested in accordance with their liability under the Internal Revenue Code and the regulations applicable to payroll taxes declared in the payroll tax return filed by the third party payer in which the credit was requested. The amounts paid to licensed real estate agents at real estate brokerage firm Y do not constitute wages within the meaning of section 3121 (a) of the Code and, therefore, are not qualifying salaries for the purposes of the employee retention credit.
The employee retention credit is available to churches and other religious organizations that were affected by capacity restrictions imposed by the government for meetings or that experienced a significant decrease in their gross revenues. Employers who apply for the employee retention credit must reduce their employee wage deduction by the amount of the credit received. While Employer W believes that some of its employees may not be as productive when working remotely, employees work their normal working hours. If an eligible employer decides not to apply for the employee retention credit in one calendar quarter, the eligible employer is not prohibited from requesting the credit in a later calendar quarter for qualifying wages paid in that next quarter, as long as it meets the requirements to apply for the credit.
The 60 percent of the salaries that Employer T pays to administrative staff for the hours during which employees actually provide services are not considered qualifying wages for the purposes of the employee retention credit. If a third-party payer applies for the employee retention credit on behalf of the client employer, the third-party payer can rely on information from the client employer about the client employer's eligibility to apply for the employee retention credit, and the client employer can maintain all records that prove the customer's eligibility to receive the employee retention credit. Consequently, a similar denial of deduction would apply under the employee retention credit, so that the employer's total deductions would be reduced by the amount of the credit as a result of this denial rule. However, upon request from the IRS, the third party payer must obtain from the customer's employer and provide the IRS with records that confirm the customer's eligibility for the employee retention credit.
However, the IRS concluded that Section 3121 (q) (which considers tips paid by the employer for the purposes of subsections (a) and (b) of Section 311 results in the employer considering those amounts paid for the purposes of Section 2301 of the CARES Act and Section 3134 of the Code (and presumably the employee retention credit in cases of qualified disaster that is requested on Form 5884-A). Section 2301 (e) of the CARES Act states that rules similar to those in section 280C (a) of the Internal Revenue Code (the Code) will apply for the purpose of applying the employee retention credit. The client employer is responsible for avoiding a “double benefit” with respect to the employee retention credit and the credit under section 45S of the Internal Revenue Code. Qualified wages are calculated without taking into account federal taxes imposed or withheld, including the employee or employer's share of social security taxes, the employee and employer's share of Medicare taxes, and federal income taxes that must be withheld.
Because employees' working hours have not changed, no part of the salary that Employer W pays to employees is qualifying wage. For employees who are not providing services due to the closure of their branch office, but who receive 50 percent of their normal hourly wage, employer T may treat the wages paid as qualifying wages for the purposes of the employee retention credit. . .
