Infrastructure Bill Passed Ends Employee Retention Tax Credit

The much-debated Infrastructure Investment and Jobs Act, approved by the Senate in August, was passed by the House of Representatives 228-206 on Friday night.  The bill will become law when it is signed by President Biden this week.

With the primary focus on roads, bridges, public works systems, and broadband Internet, there are very few tax provisions in this piece of legislation.  A separate 2022 budget reconciliation bill currently being considered by Congress is expected to address items such as Earned Income Tax Credit, Child Tax Credit, interest expense deduction limits, corporate and international tax law changes, and the $10,000 cap on state and local tax deductions.

There is a provision in this bill, however, which terminates the Employee Retention Tax Credit (ERTC) 90 days earlier than anticipated.

BACKGROUND

The Employee Retention Tax Credit, part of the CARES Act passed on March 26, 2020, originally allowed qualifying businesses a payroll tax credit on eligible wages paid between March 12, 2020 and December 31, 2020.  The Consolidated Appropriations Act (December 2020) extended the ERC tax credit through June 30, 2021, and the American Rescue Plan Act (March 2021) further extended the ERC tax credit on wages paid through December 31, 2021.  The new law rolls back the termination date of the Employee Retention Tax Credit to September 30, 2021.

NEXT STEPS

It is important to note that businesses that meet ERC tax credit eligibility may still file amended payroll tax returns to obtain the credit for qualifying periods in 2020 and 2021.  However, any wages paid after September 30, 2021 will not be eligible for the credit.

There are two ways to meet ERC tax credit eligibility – by way of a “significant decline in gross receipts” in 2020 or 2021 compared to 2019, or because of government restrictions imposed due to the coronavirus pandemic.  The gross receipts tests are intricate and vary from 2020 to 2021, as do the amounts of the credits.  For 2020, the credit is 50% of eligible wages up to $10,000 per employee for the calendar year.  For 2021, the Employee Retention Tax Credit credit is 70% of eligible wages up to $10,000 per person per quarter.  Wages used for ERTC cannot also be used toward PPP loan forgiveness or any other tax credits.  Therefore, detailed analyses must be performed to document the segregation of wages used for each program and to maximize the amount of ERTC claimed.

HOW KATZABOSCH CAN HELP

For starters, you can learn more about the Employee Retention Tax Credit by checking out any of these additional resources from our team of tax consulting professionals:

• Beware of Third Party Employee Retention Credit Vendors 
• Are you taking advantage of the Employee Retention Credit (ERC)? 
• Don’t Snooze on the Employee Retention Credit! – KatzAbosch 

If there is a possibility you may qualify for ERTC in 2020 or 2021, please contact your KatzAbosch representative or contact us here.  We are utilizing ERTC to increase cash flow for many of our clients whose revenue has been impacted by the pandemic.

Benefit from KatzAbosch’s industry-leading tax incentives and credits expertise in ERTC tax credit eligibility, a credit we’ve excelled in since its inception in 2020. With our assistance, clients have successfully claimed tens of millions of dollars in ERTC refunds. Our Employee Retention Tax Credit professionals stay up to date with the latest guidance to secure the best long-term benefits for your business.