There have been numerous changes to the Employee Retention Credits (ERC) program over the past months. The latest is that the Infrastructure Investment and Jobs Act (IIJA) terminates ERC employer credits effective September 30, 2021. The problem is that IIJA was not signed until November 15, 2021, making this a retroactive change that can leave many employers, that are not “recovery start-up businesses”, exposed to potential tax payment liabilities.
For a recap of the history of the ERC program, see our earlier post, ERC Eligibility and Your Business.
How should employers respond to these changes?
The expiration of the Employee Retention Credits (ERC) program has been shortened from December 31, 2021, to September 30, 2021. The maximum credit for each covered employee has been reduced from $28,000 to $21,000 for 2021.
- Check to make sure that the expectation of credits for the full year under ERC did not reduce Federal estimated tax payments. If payments were reduced, recalculate estimated taxes due and remit a catch-up payment immediately.
- For payrolls paid after September 30, 2021, and before November 15, 2021, make
sure that payroll taxes have been properly calculated and remitted. If there are any underpayments, remit immediately.
- If ERC credits were included in budget forecasts provided to lenders or other interested parties, these forecasts may need to be updated.
- The elimination of ERC may impact the cash requirements of the business. Updated forecasts should be assessed to determine the impact of the retroactive changes.