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IRS Shares Guidance on The Retroactive Ending of The Employee Retention Credit

In March of 2020, the Employee Retention Credit (ERC) was introduced to encourage eligible businesses to keep employees on their payroll. Over time the deadline was eventually extended to include wages paid through December 31, 2021. However, on Nov. 15, 2021, The Infrastructure Investment and Jobs Act retroactively ended the ERC and established the deadline of September 30, 2021.  Therefore, any employee wages that are paid after that date no longer qualify for the ERC.  

In response to the deadline change, the IRS has issued Notice 2021-65 to guide employers regarding the retroactive termination of the ERC. Additionally, the notice will guide employers that paid wages after the September deadline and either:  

  • Received advanced payments through the ERC on those wages. 
  • Received a reduction in employment tax deposits in anticipation of the credit for the fourth quarter in 2021 (and are now ineligible due to the deadline change).  

Employee Retention Credit 

The Employee Retention Credit was originally part of the Coronavirus Aid, Relief, And Economic Security (CARES) Act of 2020. It continued to be featured in the relief packages that followed. Employers were eligible to receive the ERC if: 

  • They experienced at least a partial suspension of operations due to COVID government restrictions.  O
  • Saw a decline in gross receipts on a quarter-over-quarter basis when comparing 2019 revenue to either 2020 or 2021 revenue.  For 2020 revenue the decrease needed to be 50%, whereas for 2021 the revenue decrease required vs. 2019 was only 20%.    

IRS Guidance  

Employers that received payment in advance from the ERC for wages paid during the fourth quarter of 2021 must repay the IRS in those amounts. The repayments are to be made by the Employee Retention Credit due date of their applicable employment tax returns.  

Employers that reduced employment tax deposits on or before December 20, 2021, for wages paid during the fourth calendar quarter in 2021, will also need to repay (deposit) the amounts retained on or before the relevant due date. Deposit due dates vary based on the schedule of the employer.  

The IRS advises employers to refer to instructions included on their employment tax returns for additional information on how to report the tax liability.  

Additionally, it is important to note that the time frame for making a claim under the program is still active. It can still be submitted as long as the claim is for a time before the new September 2021 deadline.  

These changes are important to note going forward and when looking back at 2020 records. Employers should speak with a trusted partner or advisor to go over any questions they may have.  Payroll Systems has dedicated a team to assist employers in maximizing their ERC credit and handling all the IRS paperwork. 

Is there anything Payroll Systems can help you with as you accommodate rapid legislation changes? Reach outand talk to us about the easy-to-scale solutions you need for your business. 

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.