The Infrastructure Investment and Jobs Act (IIJA), signed by President Biden on November 15, 2021, retroactively eliminates the Employee Retention Credit (ERC). With the exception of eligible recovery startup businesses, employers can no longer claim the employee retention credit for eligible wages paid after September 30, 2021.
The ERC originated with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020 and received multiple extensions in additional legislative moves intended to aid businesses as they recover from the negative economic impacts of the pandemic.
New Expiration Date
Now that the IIJA moves the ERC expiration date from December 31, 2021, to September 30, 2021, employers will not be able to claim the credit for 2021 quarter four (Q4) filings. This means companies that chose to reduce tax deposits in Q4 will now find themselves short. The IRS has not yet issued guidance on this topic, and the potential for significant underpayment penalties and interest exists. Therefore, we recommend employers catch up on any reduced deposits as soon as possible to stop the clock on potential penalties and interest.
Additionally, companies will need to reevaluate their budget projections for Q4 and/or cash flow projections for early 2022 if they previously factored in the ERC when making those determinations.
Amended Returns to Claim ERC
Although the ERC expiration has changed, those who did not take advantage of the credit can still do so by filing amended 941 returns for the quarters between March 2020 and September 2021. The normal statuary guidelines apply, so the taxpayer must file the amended returns within three years of the original form due date.
Our team will continue to follow this topic closely. Should you have any questions about how to navigate this change to the ERC and its impact on your business, contact us today.
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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.