The Infrastructure Investment & Jobs Act, signed into law by President Biden on November 15, 2021, put an end to the Employee Retention Credit (ERC) earlier than anticipated. This legislation makes wages paid after September 30, 2021 ineligible for the credit. Wages that are paid by an eligible Recovery Startup Business will still qualify for ERC. For the purpose of the Employee Retention Credit, a Recovery Startup Business is one that began operations on or after February 15, 2020, maintains average annual gross receipts that do not exceed $ million, and employs one or more employees (other than 50% owners).
The Employee Retention Credit was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, and amended by the Consolidated Appropriations Act in December 2020. The American Rescue Plan Act, enacted March 11, 2021, made the ERC available to eligible employers for wages paid during the third and fourth quarters of 2021; however, the new legislation repeals the fourth-quarter extension.
The ERC, which provides a per-employee credit to eligible businesses based on a percentage of qualified wages and health insurance benefits paid to employees, was intended to help businesses retain their workforces and avoid layoffs during the coronavirus pandemic. In March 2021, the IRS issued detailed guidance (Notice 2021-20) about the ERC to address specific questions about eligibility requirements and calculations.
The ERC can provide a substantial amount of money, so it is important that employers don’t miss the opportunity to file a claim for all eligible quarters (amended returns are permitted). Feel free to reach out to a GYF Tax Executive at 412-338-9300 if you need help determining if your business qualifies for the Employee Retention Credit for any quarter in the 2020 or 2021 tax years or if you have other related questions.