Retroactive Termination of the Employee Retention Credit

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The Internal Revenue Service (IRS) recently issued guidance to employers regarding the retroactive termination of the employee retention credit (ERC).

The Infrastructure Investment and Jobs Act, which was enacted on Nov. 15, amended the law to limit the availability of the ERC in the fourth quarter of 2021 to taxpayers that are only recovery startup businesses. Therefore, employers who are not recovery startup businesses are no longer eligible for the ERC for wages paid after Sept. 30, 2021.

In Notice 2021-65, the IRS cautions employers that paid wages after Sept. 30, 2021, and received an advance payment of the ERC for those wages that they must repay those amounts by the due dates of the applicable employment tax returns.

Employers who reduced their employment tax deposits in anticipation of being eligible for the credit must deposit the amount of that reduction on or before the relevant due date for wages paid on Dec. 31, 2021 (even if the employer does not actually pay wages on that date), and report the appropriate tax liability.

Credit unions are encouraged to consult with their tax advisor and/or payroll provider regarding ERC.

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