Law & Order

Employee Retention Tax Credit Canceled for 4th Quarter of 2021

By SEMA Washington, D.C., Staff

A provision in the recently passed Infrastructure Investment and Jobs Act (IIJA) eliminates the Employee Retention Tax Credit (ERTC) for the fourth quarter of 2021, moving the deadline for eligible wages up to September 30 from December 31. The ERTC is a COVID-19 economic relief program that was enacted in 2020 and expanded in 2021, offering a refundable tax credit of 70% of up to $10,000 in wages per quarter paid by an eligible employer in 2021 to encourage businesses impacted by COVID-19 to keep employees on their payroll. This means the 2021 tax credit is potentially $21,000 per employee ($7,000 for each quarter).

Companies with 500 or fewer employees can file a 2021 claim if they have experienced a 20% or more decline of gross receipts in a quarter compared to the same quarter in 2019. Employers claim the ERTC by withholding payroll taxes for qualified employee wages. Because the tax credit is refundable, if the withholdings do not cover the entire tax credit, the IRS will send you a check for the remaining amount. There is a chance that the opportunity to claim the ERTC in the fourth quarter may be restored in an upcoming piece of legislation if economic conditions demonstrate a need.

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