On November 15th, President Biden signed H.R. 3684, the Infrastructure Investment and Jobs Act, into law. The law ends the Employee Retention Credit (ERC) as of September 30th, 2021, for most employers.
The Consolidated Appropriations Act of 2021 (CAA) extended the qualifying period of the ERC until January 1st, 2022. But now, most businesses will no longer be eligible for the fourth quarter of 2021 (with the exception of “recovery startup businesses”). A “recovery startup business” is an employer that commenced trade after February 15th, 2020, for which the annual prorated gross receipts did not exceed $1 million over a 3-year lookback period.
In addition, any company other than a recovery startup business that received advanced credit will be required to repay those amounts to the IRS by the applicable period that the time the filing for the fourth quarter is due. If the advances are not deposited back to the IRS by January 31st, there will be applicable penalties.
If any business was reducing withholding payments in anticipation of receiving the credit, they will have until December 20th to start making the full required payments. Any withholding payments that were not paid to the IRS will also have to be repaid to the IRS by December 31st, 2021, or be subject to penalties.
The ERC is still available for the first three quarters of 2021 and retroactively for 2020. Regardless of whether your business received a Paycheck Protection Plan loan, you may still be eligible to claim the credit for these periods. Keep in mind that these programs overlap, so make sure to talk to your CPA if you have both before moving forward.
For more information, contact your PKF representative or:
Dan Patterson, CPA
Client Advisory Services Senior Associate
+1 847 783 1917