Employee Retention Tax Credit Now Only Applies Through the End of September

A recent change in legislation retroactively ended the Employer Retention Tax Credit on Sept. 30, 2021, instead of Dec. 31, 2021.

As a result of this retroactive termination, you may need to review your payroll tax compliance — including tax deposits — to make sure that it conforms to these changes.

Here’s some quick background: Congress recently passed the Infrastructure Investment and Jobs Act, and President Joe Biden signed the act on Nov. 15. Now that the legislation is in place, it repeals ERC for the fourth calendar quarter of 2021. The only exception is for employers of a recovery startup business.

The new act also modified the definition of a recovery startup business. It’s now defined as one that:

• Began operating after Feb. 15, 2020, and
• Has average annual gross receipts of less than $1 million

A previous prerequisite was that a recovery startup business must not have otherwise met the requirements for an eligible employer qualifying for the ERC. So, your business would have had to have experienced a significant decline in gross receipts or have been subject to a full or partial suspension under a government order. However, that no longer applies.

Because of this new definition, an employer that wasn’t a recovery startup business in Q3 2021 might qualify as a recovery startup business in Q4 2021. And as such, you may be able to claim the ERC for the fourth quarter.

If you retained payroll taxes in anticipation of receiving the ERTC based on post-Sep. 30, 2021, payroll taxes, you should review your situation. That way, you can determine how and when to repay those taxes and address any other compliance issues.

If you have questions or concerns about how the ERC retroactive termination will affect your business, please let us know.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.