The Internal Revenue Service (IRS) issued Notice 2021-49 on August 4th, which states that the Employee Retention Credit (ERC), which was made available for businesses suffering from the COVID-19 crisis, will not be available with respect to wages paid to a majority owner, or such owner’s spouse, if the majority owner has a brother or sister (whether by whole or half-blood), ancestor, or lineal descendant who worked for the company. This came as a tremendously unpleasant surprise for
Wages given to a majority owner and such owner’s spouse will be eligible for the Employee Retention Credit in the case that the majority owner of a corporation does not have a brother or sister (whether by whole or half-blood), an ancestor, or a direct descendant in the line of succession.
You did read that sentence correctly. Earnings provided to a majority owner of a corporation are ineligible for the ERC credit if that owner has any live family members in their family; on the other hand, if that majority owner does not have any living family members in their family, those wages are ineligible for the ERC credit.
This is the worst kind of unfairness because it makes absolutely no sense. Orphans who do not have any children of their own are the only ones who are eligible to support the credit, despite the fact that people who have big families are the ones who require the credit in order to provide for their family. This is an anti-family, anti-American, and completely illogical and unjustifiable position to take.
However, this does not indicate that the legislation cannot be enforced, despite the fact that it looks to be rather discriminating.
As a result of this, we have reason to expect that Congress and the President will take action to remedy this situation, preferably before we retire. If you have an opportunity, please send an email to your representative in congress, your senator, and the president.
In addition, Brandon and I have written about the recently provided advice for the Paycheck Protection Program. This writing may be seen in our recent post for Forbes, which is titled “Borrower Friendly PPP Loan Forgiveness Regulatory Changes Provided By The New SBA Regulation.”
The following is a transcription of the precise text that appears in Notice 2021-49, which examines this perplexing rule:
When the rules of Code sections 152(d)(2)(A)-(H) and 267(c) are applied, the majority owner of a corporation is considered a related individual for the purpose of the employee retention credit, and that individual’s wages do not count as qualified wages. This is the case if the majority owner has a brother or sister (whether by whole or half-blood), ancestor, or lineal descendant. In other words, when the constructive ownership rules of section 267(c) are applied, the direct majority owner’s ownership of the corporation is ascribed to each of the owner’s family members with a relationship stated in section 267(c)(4); furthermore, because each of those family members is regarded to possess more than 50 percent of the stock of the corporation after applying section 267(c), the direct majority owner of the corporation would have a relationship as defined in section 267(c)(5). Therefore, in order to qualify for the employee retention credit, the direct majority owner must be considered a linked individual.
For the purposes of the employee retention credit, the spouse of a majority owner is considered a related individual whose wages are not qualified wages if the majority owner has a family member who is a brother or sister (whether by whole or half-blood), ancestor, or lineal descendant (and is thus deemed to own the majority owner’s shares under section 267(c) of the Code), and the spouse bears a relationship to the family member that is described in section 152(d)(2)( For instance, the brother of a direct majority owner would be considered a constructive majority owner according to sections 267(c)(2) and (4), and the spouse of the direct majority owner would be considered a related individual to the constructive majority owner due to the in-law relationship described in section 152(d)(2). These provisions can be found in the Internal Revenue Code (G).
If the majority owner of a corporation does not have a brother or sister (whether by whole or half-blood), an ancestor, or a lineal descendant as defined in section 267(c)(4) of the Code, then neither the majority owner nor the spouse is a related individual within the meaning of section 51(i)(1) of the Code, and the wages paid to the majority owner and/or the spouse are qualified wages for the purposes of the employee retention credit, provided that all of the other requirements for qualified wages
The following examples, which may be found in the Notice, can assist in illuminating these rules:
Example 1: There Will Be No ERC Credit Awarded to the Owner
Individual G holds one hundred percent of the shares in Corporation B. Individual G is H’s parent. Individual H is the child. With regard to the first three months of the calendar year 2021, Corporation B qualifies as an eligible employer. Individual G is an employee for Corporation B, however Individual H is not one of the company’s employees. Individual H is given ownership of Corporation B equal to that of Individual G in accordance with the attribution rules outlined in section 267(c) of the Code. As a result, both Individual G and Individual H are treated to hold equal ownership of the business. Individual G is connected to Individual H in the relationship that is outlined in subparagraph (C) of section 152(d)(2) of the Code. As a result, Corporation B is not permitted to use any wages given to Individual G as qualifying earnings for the purposes of the employee retention credit since Individual G is considered to be a connected individual for these reasons.
Example 2: Both the Owner and the Spouse May Be Eligible for an ERC Credit
Individual J holds one hundred percent of the shares in Corporation C. With regard to the first three months of the calendar year 2021, Corporation C qualifies as an eligible employer. Individuals J and K are married, and according to the requirements of section 267(c)(4) of the Code, neither of them has any other family members. Employees J and K are both employed by the same company, which we’ll refer to as Corporation C. Individual K has a one hundred percent ownership stake in Corporation A, as per the attribution rules outlined in section 267(c), and both Individual J and Individual K are treated as having a one hundred percent ownership stake in the company. On the other hand, Individuals J and K do not share any of the relationships to one another that are outlined in Code section 152(d)(2)(A)-(H). Therefore, wages paid by Corporation C to Individuals J and K during the first calendar quarter of 2021 may be treated as qualified wages if the amounts satisfy the other requirements to be treated as qualified wages. These requirements include that the wages must have been paid to the individuals directly.
After we have finished scratching our brains over it, our Employee Retention Credit Guide, in which we address everything related to ERC, will be updated to include this newly published guideline.
The retention of employees may be improved using these five strategies.
Does your company place a high priority on retaining its employees? If not, then it ought to be. Everyone is familiar with the term “The Great Resignation.” This is a genuine phenomena that can be observed in practically every sector of the economy. An all-time high of 4.3 million people in the United States left their employment in August, according to the most current report from the Bureau of Labor Statistics of the United States. This is 2.9 percent of the total workforce.
Your competitors are making more of an effort than ever before to recruit your employees. In addition, the rise of remote work has raised the level of competitiveness among job hopefuls who possess in-demand talents. Therefore, the issue that has to be asked is: are you doing enough to keep your employees? It is essential to act fast and wisely if you are having difficulty improving employee retention rates. In today’s competitive environment for top talent, here are five techniques that can assist you in achieving success.
The Department of Education has given their preliminary approval for a settlement that will forgive $6 billion in student loans.
According to research conducted by Robert Half, almost four in ten working professionals have the impression that their careers have been stagnant since the career of the epidemic. This percentage climbs to 66 percent for workers in the age bracket of 18 to 24. And among those who claimed that they had hit a plateau in their career, about half of them reported that they have not experienced any improvement in their compensation, career promotion, or skills development.
Employees have a better sense that they are respected and that they are contributing to the success of the company when they are able to see a clear route to more salary and responsibility through internal promotions. Take for instance the store Target. The company with headquarters in Minneapolis is staying on top of employee retention efforts in ahead of the holiday shopping season by announcing that current store colleagues would receive 5 million more hours of work, which will result in more than $75 million in additional compensation. In addition, the company has stated that it intends to reduce the number of seasonal employees it employs compared to prior years and instead concentrate on providing more adaptable working hours, as well as better training, salary, and benefits for the workforce it already has.
Invest in the education of your employee.
Employees perceive training as an investment in their worth as well as a compelling motivation to remain with the company in which they are already employed. Workers desire to be employed by a company that will help them advance their careers; if such company is not there, the workers will likely look for employment elsewhere and take their skills with them. The results of a study conducted by Better Buys provide evidence in support of this notion.
The poll indicated that 92 percent of employees believe having access to opportunities for professional development is either critical or extremely important. Additionally, employees who have access to growth opportunities have a retention rate that is 34 percent higher and are engaged in their work 15 percent more. In the end, a powerful training and development program may have a multitude of advantages, both short-term and long-term, including enhancing employee engagement and retention, promoting new thought, and providing your firm an edge over its competitors.
Provide childcare support
Nowadays, childcare is an issue that affects more than just the family. The epidemic has demonstrated that this is also a problem for businesses. According to the findings of a national panel study that polled 2,500 working parents, over 20 percent of respondents were forced to quit their jobs or cut back on the work of hours they worked because there was not enough childcare available.
Despite the fact that providing assistance with childcare is an excellent strategy for recruiting, retaining, and productivity for working parents, just 7% of employers give any kind of childcare relief to their employees. Give your team something that its rivals don’t have that will help you keep your best employees. Listen to your workers in order to have an understanding of the challenges they face. It’s a problem with their finances for some people. Therefore, it may be a realistic alternative to give a caregiving subsidy or to form a partnership with a child care provider in order to establish a tuition discount program. For some families, the ability to be flexible with drop-off and pick-up hours might be the deciding factor in whether or not the long journey is manageable.
Make work arrangements as flexible as possible.
The past year has brought about shifts in perspective and strategy among employees on their work. In a nutshell, employees want more, and they don’t want to make any concessions for it. According to the results of the EY 2021 Work Reimagined Employee Survey, more than half of the employees questioned throughout the world would contemplate quitting their job in the aftermath of a pandemic if they were not offered some degree of flexibility in terms of where and when they work. According to Liz Fealy, who is the Deputy Leader of EY’s Global People Advisory Services, “The readiness of employees to shift employment in the present economic scenario is a game-changer.” “Flexible working is the new currency for recruiting and maintaining top people. The recent Covid-19 epidemic shown that flexibility can work to the benefit of both employees and businesses.
Make use of acknowledgement and incentives.
When was the last time you complimented an employee on their work or told them “thank you” for their efforts? Ensono is one company that developed a program called “Ensono Shout-Outs” so that everyone of its employees would have the opportunity to express their gratitude in a public setting to another employee or group of employees at the company that assisted them with a project. In order to remain competitive in this market, according to Meredith Graham, Chief People Officer of Ensono, “We can’t focus exclusively on remuneration, and we need to focus more on engagement.”
You can build a sense of engagement among your staff members, to the point where they are actually inspired to work hard and remain with the company, by routinely acknowledging their contributions and achievements. In point of fact, SurveyMonkey collaborated with Bonusly to investigate the relationship between recognition and employee retention. Among the 1,500 people who participated in the study, 63 percent of those who were “always” or “usually” recognized stated that it is extremely unlikely that they will look for work during the next three to six months.
Jennifer Kraszewski, who serves as the Vice President of Human Resources at Paycom, is quoted as saying that “Building a great culture involves more than simply lip service.” The practice of paying attention to one’s organization’s culture should be ongoing and purposeful. A major differentiation in today’s more cutthroat business environment is employee retention. You will be able to effectively recruit top talent, create employee engagement, and reduce undesired churn if you adopt only a few critical methods.