The Employee Retention Credit (ERC) has ended early with the signing of the Infrastructure Investment and Jobs Act into law. Previously set to expire as of December 31, 2021, the credit has retroactively ended as of September 30, 2021.
Taxpayers can still make retroactive claims for 2020 and 2021 Q1–Q3. However, no new claims may be made for 2021 Q4, unless you are a Recovery Startup Business. If a business qualifies as a Recovery Startup Business, the employee retention credit is still available for 2021 Q4.
Why Is It Ending Early?
The ERC has been a huge source of additional COVID relief funds for many taxpayers these past two years. However, a provision was included in the infrastructure bill this past summer that created an early end to the program.
The infrastructure bill passed the Senate back in August, and the House tried multiple times over the weeks that followed to pass it. However, many Democrats wanted the infrastructure bill packaged with a spending bill, so they could pass the two simultaneously.
On Friday, November 5, the House decided to move forward without the spending bill and passed the infrastructure bill. President Biden signed the infrastructure bill into law on Monday, November 15.
If you were planning to take the employee retention credit in 2021 Q4, work with your third-party payroll provider to verify whether any tax payments for 2021 Q4 were reduced because of planning for the credit. Many large payroll providers did not allow their clients to adjust their deposits in 2021 Q4 due to the uncertainty of the infrastructure bill over the past few weeks
We might see the employee retention credit retroactively reinstated for 2021 Q4 through one of the year-end tax extender bills in December. Various groups have already begun writing letters to Congress to request the credit be reinstated for 2021 Q4. However, where this goes is uncertain.
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