Recent guidance from the IRS provides further clarification for taxpayers that expected to take advantage of the employee retention credit (ERC), which was ended on October 1, by the Infrastructure Investment and Jobs Act. Notice 2021-65 details how businesses that reduced payroll tax deposits in anticipation of receiving the credit can avoid penalties.
Businesses must act quickly with only two weeks to spare before facing penalties. Failure to deposit payroll taxes by December 20 could result in severe penalties.
The notice covers two specific scenarios for avoiding penalties:
Penalty waivers will not apply for any deposits that were reduced in anticipation of receiving the ERC after December 20, 2021. Keep in mind that “recovery start up businesses” are still eligible to claim the ERC through the fourth quarter and are exempt from the guidance.