The Employee Retention Tax Credit (ERTC), originally a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, was created to encourage businesses to retain employees during the COVID-19 pandemic. Congress later expanded and extended the ERTC to apply to eligible wages through the end of 2021. However, the Infrastructure Investment and Jobs Act (IIJA), signed by President Biden on November 15, 2021, retroactively ends the ERTC as of September 30, 2021, one quarter earlier than anticipated, unless the employer is a recovery startup business. As a result of this retroactive termination, employers may need to review their payroll tax compliance to make sure it conforms with these changes.
What is the ERTC?
Prior to the enactment of the IIJA, the law allowed a 70% credit on up to $10,000 in eligible wages per employee per quarter for all of 2021 if an employer met certain criteria. As a result, an eligible employer could receive up to $28,000 in credits per employee for the year ($10,000 quarterly wage max x 70% x 4 quarters). The IIJA terminates this credit program on September 30, 2021 except for recovery startup businesses.
Who is still eligible for the ERTC in Q4?
A recovery startup business is defined as any employer that:
- Began carrying on a trade or business after February 15, 2020, and
- Had average annual gross receipts of less than $1 million.
If an employer meets these criteria, they are still eligible for the ERTC in 4th Quarter 2021, up to the $50,000 startup business credit maximum. If not, the ERTC is no longer available for wages paid by that employer after September 30, 2021.
What should my business do moving forward?
If you have retained payroll taxes in anticipation of receiving the ERTC in the 4th quarter of 2021, please review your situation with your advisors to determine how and when to repay those taxes along with addressing any other items. It is anticipated that the IRS will publish guidance to assist employers with handling these issues.
Find out if your business is eligible for the Employee Retention Tax Credit.
Our advisors are closely following the ERTC changes and will continue to publish insights to keep you informed. If you have additional questions about the ERTC and to discuss how we can best assist you and the associated fees, contact an Anders advisor below.All Insights