Changes to the Employee Retention Credit

The IRS has announced changes to the Employee Retention Credit. The ERC was part of a COVID-19 relief package. The new rules have decreased the time frame that employers can take advantage of the credits.

When Were The Changes Made?

The ERC, a relief measure in the “The Taxpayer Certainty and Disaster Tax Relief Act,” the tax credit was extended and expanded last March 2021, at the time made the ERC available to employers through Dec. 31st, 2021.

The rules stated, that wages paid before March 13th, 2020, or after Dec 31st, 2021, did not qualify. Employers could technically still claim the ERC for the 3rd and 4th qtr of 2021.

How has the ERC changed?

The passing of the recent infrastructure bill (approved by the Senate a couple of weeks ago) would eventually end the employee retention credit (ERC) early, making wages paid after Sept. 30, 2021, ineligible for the credit (except for wages paid by an eligible recovery startup business).

The way this works out is that September 30th would be the last day and therefore the 3rd qtr. of 2021 be the last quarter an employer would be eligible to claim the ERC credit.

Read the update from the IRS:

Employee Retention Credit — “The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, amended and extended the employee retention credit (and the availability of certain advance payments of the tax credits) under section 2301 of the CARES Act.

The American Rescue Plan Act, enacted March 11, 2021, added section 3134 to the Internal Revenue Code to amend and extend the employee retention credit (and the availability of certain advance payments of the tax credits. See Notice 2021-20Notice 2021-23Notice 2021-49, and Revenue Procedure 2021-33 for guidance on the employee retention credit for calendar quarters in 2020 and 2021.”

To read more on this change and others, please visit the IRS online: https://www.irs.gov/coronavirus/employer-tax-credits