Say Goodbye to the Employer Tax Credit (ERC)

December 2nd, 2021 at 7:21 PM

Say goodbye to the employee retention credit (ERC) for the fourth quarter. Lawmakers giveth, and lawmakers taketh away.

In this case, what lawmakers did is pitiful. It’s like magic: now you see it, now you don’t.

On March 11, 2021, the American Rescue Plan Act of 2021 became Public Law 117-2. This new law extended the ERC to the third and fourth quarters of 2021.

On November 15, 2021, the Infrastructure Investment and Jobs Act became Public Law 117-58 and ended the ERC three months early, retroactive to September 30, 2021.

Lawmakers did not kill the fourth-quarter 2021 ERC for start-up businesses. That tax benefit survived. Thank goodness!

Still, you cannot consider any retroactive repeal of a tax law to be good tax policy. And this retroactive repeal was done only nine months after passage. It is disgraceful.

But don’t let this bad news deter you from claiming the credit for 2020 and for the first three quarters of 2021. You may remember that the remaining credits can add up to $26,000 per employee.

And keep in mind that there’s no mad rush—you have time. You can claim the ERC anytime during the three-year statute of limitations.

Mark S. Fineberg, CPA