Early Termination of the Employee Retention Credit
By Jason Fry
The Employee Retention Credit is ending earlier than expected for most employers. What are the implications for your taxes?
Early termination of the Employee Retention Credit
If your organization is taking advantage of the Employee Retention Credit (ERC), you should be aware of a recent change to the program. The ERC was established by the Biden administration under the CARES Act, and was intended to give businesses an incentive to retain workers and avoid major layoffs during the COVID-19 crisis by providing a per-employee tax credit based on wages and applicable health benefits.
On November 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act into law which ended the ERC earlier than expected, making wages paid after Sept. 30, 2021 ineligible to be claimed. According to IRS guidance, the only exception is for recovery startup businesses that are still eligible to claim the credit through the end of 2021.
Some employers may have already submitted the IRS Form 7200 to request an advance payment for the last quarter of the year. If employers are no longer eligible to claim the credit and it was already paid, employers should still include this information on their employment tax returns and may face a balance when their taxes are filed. If it has not been paid yet, the IRS will most likely reject the form.
Learn more about how our employee tax credit solutions can help your company’s bottom line when it comes to hiring and retaining your workforce. You can take advantage of this information and other practices to help you make sure you're more successful in managing and capturing your tax credits.
Did you know that the Work Opportunity Tax Credit (WOTC) was extended to 2025? If your company hasn't decided to take advantage, now is a great time to do so. Learn how the Work Opportunity Tax Credit Management service from Equifax can help your company's bottom line when it comes to hiring and retaining your workforce.