Early Termination of the Employee Retention Credit Comes with New Infrastructure Bill

The Employee Retention Credit (ERC) will be terminated early as a result of the Infrastructure Investment and Jobs Act (H.R. 3684), which is expected to be signed into law within days by President Biden.

The ERC was created by the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020 and subsequently modified by Congress to encourage employers to keep employees on payroll. It was set to expire on January 1, 2022. However, with this new legislation, wages paid after September 30, 2021, will be ineligible for the ERC unless the employer is a recovery start up business.

While the IRS has already issued guidance on claiming the credit in the third and fourth quarters of 2021 (Notice 2021-49), it is anticipated that the IRS will be providing further guidance for employers as it continues to monitor these legislative developments.

If your church or ministry has retained payroll taxes in anticipation of receiving the ERC based on wages paid after September 30, 2021, it will be important to determine how and when to repay these taxes.

Although the eligibility period for the ERC will end early with the passage of this legislation, it is important to remember that the timeframe for making a claim under the program for previously paid qualified wages will continue for at least three years. Eligible employers can file a claim for a retroactive ERC refund for past calendar quarters by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.