IRS Issues ERC Guidance

Aug 17, 2021, 4:18 PM

(from PKF O’Connor Davies and NBOA) Earlier this month, the IRS issued guidance on the Employee Retention Credit (ERC). Here are the highlights of this guidance for independent schools:

  • The proceeds from PPP forgiveness can be excluded from gross receipts when determining whether a business has a significant decline in gross receipts.
  • ERC credits must be reflected on the return for the year in which the wages were paid.
  • A school will qualify for a quarter if there is a significant decline in gross receipts in either that quarter or the immediately preceding one.
  • If the school qualifies for ERC, there is no restriction on applying the credit to part-time employees.
  • There will most likely not be a 4th quarter ERC.

In addition to guidance from the IRS, the AICPA non-profit members have expressed that accounting for the ERC should be treated as grant revenue and not a reduction in wages.

For more information on the ERC update, see this summary from PKF O’Connor Davies and information from the IRS: IRS Notice 2021-49 and IRS Revenue Procedure 2021-33


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