On Friday, November 5th, the House of Representatives passed the $1 trillion Bipartisan Infrastructure and Jobs Act (BIJA), which included language for early termination of the Employee Retention Credit (ERC). The measure had already passed the Senate and is heading to President Biden’s desk for expected approval.
The BIJA ends 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. (Recovery startup businesses are defined as businesses that began conducting any trade or business after February 15, 2020; and which had average annual gross receipts not exceeding $1 million; and does not otherwise qualify for the ERTC either by full or partial closure or significant decline in gross receipts requirements).
The ERC was created by the Coronavirus Aid, Relief, and Economic Security (CARES), and amended by the Consolidated Appropriations Act. The American Rescue Plan Act, enacted March 11, made the ERC available to eligible employers for wages paid during the third and fourth quarters of 2021; however, the BIJA will repeal the fourth-quarter extension.
Early termination of the credit will require employers that utilized the fourth quarter credit by reducing employment tax deposits to repay these amounts. More guidance on this should be forthcoming by the IRS.
We will keep you abreast of any updates. If you have any questions please reach out to our ERC Services Team.