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EMPLOYEE RETENTION CREDIT ELIMINATED BY INFRASTRUCTURE INVESTMENT AND JOBS ACT

EMPLOYEE RETENTION CREDIT ELIMINATED BY INFRASTRUCTURE INVESTMENT AND JOBS ACT

The House of Representatives passed the Infrastructure Investment and Jobs Act which President Biden is expected to sign. In a bill that contains few tax provisions, perhaps one of the most impactful is the elimination of the employee retention credit (ERC) for the fourth quarter of 2021. Wages paid after September 30, 2021 are now ineligible for the credit, apart from wages paid by an eligible recovery startup business.

A recovery startup business is defined as a business that:

  • began carrying on a trade or business after February 20, 2020, and
  • whose average gross receipts as calculated under 448(c)(3) does not exceed $1,000,000.

A recovery startup business’s total ERC for eligible employees is limited to $50,000 per quarter.

This retroactive change may impact the cash flow of businesses that were expecting to receive the ERC this quarter, especially those businesses that have been deferring payroll tax deposits in anticipation of receiving the credit.

 

11/08/2021

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