Employee Retention Credit ends early

November 16, 2021

On Monday, November 15, President Biden signed the Infrastructure Investment and Jobs Act, the bipartisan infrastructure bill, into law. This legislation contains $550 billion in new spending including funding for roads and bridges, railroads, improvements to the power grid, broadband expansion, water infrastructure, public transit, and airports. There were few significant tax implications included in the bill except for a provision that terminates the Employee Retention Credit (ERC) after September 30, 2021.

The ERC is a refundable payroll tax credit created by the CARES Act. Originally set to expire at the end of 2020, the ERC was extended through 2021 by subsequent legislation. The infrastructure bill repeals the ERC for the fourth quarter of 2021, except for a narrow category of employers that qualify as a recovery startup business. Thus, for most employers, wages paid after September 30, 2021, are ineligible for the credit.

The AICPA has submitted a letter to Congress requesting a directive to the IRS to waive penalties for failure to deposit employment taxes after September 30, 2021, and provide a reasonable, practical method for payment of these unpaid taxes.

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