The
Employee Retention Tax Credit has been changed to no longer cover the 4th
quarter of 2021
In
2020, Congress created the Employee Retention Tax Credit (ERTC), one of several
programs to aid small businesses during the COVID-19 pandemic. As the name
suggests, the ERTC is a credit to offset the cost of payroll taxes on employees
that small businesses retained through the pandemic.
The ERTC was
originally set to expire on January 1, 2022, giving employers the ability to
claim it for all four quarters of 2021. Since the ERTC
offered savings of $7,000 per employee per quarter in 2021, this meant
employers were eligible to up to $28,000 per employee in tax credits this
year.
However,
on November 15, 2021, the federal Infrastructure Investment
and Jobs Act (IIJA) was signed into law. The
physical infrastructure law includes a provision moving up
the expiration date of the ERTC from January 1, 2022, to October 1, 2021, to
offset the infrastructure spending. In other words, the IIJA terminated the ERTC before the
4th quarter of 2021.
The
ERTC now only applies to three quarters instead of four this
year, meaning the maximum available ERTC per employee in 2021 is now
$21,000 instead of $28,000.
Startups
The
only exception to this change applies to recovery startup businesses,
who have several ERTC provisions that are unique to them. Recovery startup
businesses are still eligible to claim the ERTC for Q4 of 2021.
Refunds
In
addition, a qualifying employer can still claim a refund for
overreported taxes for up to 3 years after initially filing the
tax reports.
This information is courtesy of the National Federal of
Independent Businesses
