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The Employee Retention Credit (“ERC”) of the March 2020 Cares Act provided aid to small businesses that did not qualify for Paycheck Protection Program (“PPP”) loans. Congress extended the ERC twice, finally settling on December 31, 2021 as the end date for eligible employers to participate in this program.
On August 4, 2021, the IRS issued Notice 2021-49 to provide additional clarity on updates to the ERC for the 3rd and 4th quarters of 2021, signaling to businesses and tax professionals that the credit would be in play for the entirety of 2021.
The Infrastructure Bill signed by President Biden on Nov. 15 contains a provision that ends the employee retention credit retroactively to September 30, 2021, instead of the previous December 31, 2021 sunset date. This means that employers can only claim the credit for wages paid through the end of September 2021. The legislation does not impact the ability or timing for employers to claim the credit for either 2020 or the first three calendar quarters in 2021.
It should be noted that this is not a cut-off for ERC claims. Employers will be still able to claim the credit for 2020 and/or the first three calendar quarters in 2021. These claims must be filed within three years of the original due date of Form 941, with respect to the credit being claimed within the quarter.
This credit is a refundable credit that that can be up to $5,000 per employee in 2020 and up to $7,000 per employee, per quarter in 2021 (max $21,000 for three quarters in 2021).
The Tax Services group at Schneider Downs has experience consulting with businesses on all aspects of the Employee Retention Credit. For more information on how your business can take advantage of the ERC and other relevant grants under COVID-19 tax legislation, please reach out to one of the contacts below or a member of your Schneider Downs team.
Matthew Werner – Shareholder, Tax Advisory Services
Ross Alessandro, III – Shareholder, Credits and Incentives