The Infrastructure Investment and Jobs Act (the “IIJA”), which was signed by President Biden on November 15, 2021, retroactively eliminates an employer’s ability to claim the employee retention credit (“ERC”) for eligible wages paid during the fourth quarter of 2021. The repeal of the ERC by the IIJA affects all employers that have reduced employment tax deposits or have requested an advance of the ERC for the fourth quarter of 2021. Below is an overview of the ERC and key considerations for employers.
Overview of the ERC
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) established a refundable employment tax credit for eligible employers paying qualified wages and health plan expenses. Originally, the covered period for the ERC under the CARES Act was March 13, 2020 to December 31, 2020. The Consolidated Appropriations Act, 2021 extended the ERC to include wages paid before July 1, 2021 and the American Rescue Plan Act of 2021 further extended the coverage period to include wages paid between July 1, 2021 and December 31, 2021. The IIJA eliminates the ERC for the fourth quarter of 2021, changing the end date of the credit to September 30, 2021 (unless the employer specifically qualifies as a “recovery startup business”).
Generally, eligible employers can fund the ERC by: (1) reducing the employer’s portion of employment taxes that otherwise would have been deposited, up to the amount of the anticipated credit, without penalty, or (2) requesting an advance of the ERC from the IRS for the amount of the credit that is not funded by reducing the employer’s portion of employment taxes.
Key Considerations for Employers
The post Infrastructure Investment and Jobs Act Brings an Early End to the Employee Retention Credit appeared first on Employee Benefits.
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