This Page is Not Current For the latest updates, see the Employee Retention Credit. These FAQs do not reflect the changes made by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), enacted December 27, 2020, the American Rescue Plan Act of 2021 (ARP Act), enacted March 11, 2021, or the Infrastructure Investment and Jobs Act (Infrastructure Act), enacted November 15, 2021. The Relief Act amended and extended the employee retention credit (and the availability of certain advance payments of the tax credits) under section 2301 of the CARES Act for the first and second calendar quarters of 2021. The ARP Act modified and extended the employee retention credit for the third and fourth quarters of 2021. The Infrastructure Act terminated the employee retention credit for wages paid in the fourth quarter of 2021 for employers that are not recovery startup businesses. This FAQ is not included in the Internal Revenue Bulletin, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case. 84. Are qualified wages excluded from gross income as "qualified disaster relief payments"? No. Section 139 of the Internal Revenue Code (the “Code”) excludes from a taxpayer’s gross income certain payments to individuals to reimburse or pay for expenses related to a qualified disaster (“qualified disaster relief payments”). Although the COVID-19 outbreak is a “qualified disaster” for purposes of section 139 the Code, qualified wages are not excludible qualified disaster relief payments, because qualified wages are what an individual would otherwise earn as compensation, rather than payments to offset any particular expenses that an individual would incur due to COVID-19. Section 139(c)(2) of the Code provides that for purposes of section 139 of the Code, the term “qualified disaster” includes a disaster determined by the President to warrant assistance by the Federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 – 5207. The President has made such a disaster determination for all 50 states, the District of Columbia, and all U.S. Territories. A “qualified disaster relief payment” is defined by section 139(b) of the Code to include any amount paid to or for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster. Qualified disaster relief payments do not include qualified wages paid by an employer, even those that are paid when an employee is not providing services. Back to FAQ Menu
