Infrastructure Bill Preserves the Employee Retention Credit for 2020 and Most of 2021

The Employee Retention Credit continues to be available to eligible employers for 2020 and the first three quarters of 2021, however, it can no longer be claimed by most employers for wages paid after September 20, 2021, due to a provision in the Infrastructure Investment and Jobs Act, enacted on November 15, 2021.

Can Employers Still Apply for the Employee Retention Credit in 2020 and 2021?

Eligible employers can continue to claim the credit for wages paid between March 12, 2020, and October 1, 2021, until the statute of limitations for the Form 941 expires. In most cases, these amended employment tax returns can be filed by April 15, 2024, for 2020 credits and April 15, 2025, for 2021 credits. If you have not determined your qualification as an eligible employer, we will be glad to help you with the analysis.

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Is the Employee Retention Credit Available for 4^th Quarter 2021?

Only eligible recovery startup businesses can continue to claim the ERC for 4^th quarter of 2021. To qualify, these businesses must have started operating after February 15, 2020, and have average annual gross receipts of less than $1,000,000 for the three-year period immediately preceding the quarter for which the credit is claimed.

What if an Employer Stopped Remitting Employment Taxes for 4^th Quarter 2021?

Some employers stopped remitting employment taxes in anticipation of the ERC for the 4^th quarter 2021.  Unless employers are using credit carryforwards from prior quarters to fund these 4^th quarter payroll deposits, employers need to contribute payroll taxes that should have been paid in the fourth quarter as soon as possible. Notice 2021-24 provides penalty relief for qualified wages paid in 2021. However, the retroactive repeal of these rules, eliminates any wages paid in Q4 2021 from qualified wages and thus this notice does not apply.

The IRS has not released guidance waiving the failure to deposit penalty specifically because of this retroactive law change. Taxpayers receiving penalties for failure to deposit these taxes should request a waiver of the penalty based on reasonable cause. While we can grant no assurance that these requests will be granted, relief is more likely to be granted to those taxpayers who deposit unpaid taxes as soon as they became aware of the law change.

How Can I Learn More about ERC?

Ask questions about the ERC or schedule a complimentary ERC scoping conversation with a Cherry Bekaert tax credit professional.