Congress Eliminates the ERTC for 4th Quarter of 2021

Date: November 23, 2021

In the CARES Act of 2020, Congress created the Employee Retention Tax Credit (ERTC), among other programs, to aid small businesses during the COVID-19 pandemic. The ERTC aimed to incentivize employee retention by offering a quarterly credit for each qualified employee of the employer. The Credit was originally set to expire on January 1, 2022, giving employers the ability to claim it in each quarter of 2021.

Much to the chagrin of NFIB and small business owners nationwide, the Infrastructure Investment and Jobs Act included a provision terminating the ERTC for the 4th quarter of 2021. This provision moved up the expiration date of the Credit from January 1, 2022, to October 1, 2021. NFIB recently joined a coalition in sending a letter to Congressional leaders, urging them not to pass this harmful provision. Our advocacy went unheeded. Congress passed the Infrastructure Bill on November 5th and the President signed it into law on November 15th.

Even though Congress eliminated the ERTC in the middle of the 4th quarter, the change is retroactive to October 1, 2021. This means anyone who previously retained payroll taxes to claim the Credit for Q4 2021, or received an advance payment of the Credit via Form 7200, must immediately remit the proper tax amount or return the Credit amount received for Q4.

Additional points of interest from Congress’s early termination of the ERTC:

  • The total available ERTC for 2021 is reduced from $28,000 to $21,000. An eligible employer can now claim up to 70 percent of qualified wages (capped at $10,000) per employee, in each qualifying quarter. This equates to $7,000 for Q1, Q2, and Q3, equaling a yearly sum of $21,000.
  • A qualifying employer can still claim a refund of overpaid taxes (i.e. claim the ERTC) for up to 3 years after the initial filing of Form 941. This should be done by filing a Form 941-X.
  • The expiration of the ERTC for recovery startup businesses was unchanged. If an employer can qualify as a recovery startup business, they can claim the ERTC in Q4 of 2021.

For more information on the ERTC, including how an employer becomes eligible, how to claim the Credit, or what qualifies as a recovery startup business, you can review these recent NFIB ERTC resources:

 

November 16, 2021

Related Content: Legal - Blog | Coronavirus | Taxes

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