Employee Retention Tax Credit Canceled for 4th Quarter 2021

November 10, 2021

On November 5, 2021, Congress passed the Infrastructure Bill that, once signed by President Joe Biden, would terminate the employee retention tax credit (ERTC), making wages paid after September 30, 2021, ineligible for the credit.

ERTC was first introduced by the CARES Act in March 2020, which allowed qualifying business owners to claim a payroll tax credit on eligible wages paid between March 12, 2020, and December 31, 2020. The Consolidated Appropriations Act, 2021, extended ERTC through June 30, 2021, while the American Rescue Plan Act extended ERTC through December 31, 2021. The Infrastructure Bill now repeals the original extension of ERTC into the 4th quarter of 2021.

ERTC is still available for wages paid by a “recovery startup business” in the 4th quarter of 2021. A “recovery startup business” is one that:

  • Began operations after February 15, 2020
  • Whose average annual gross receipts for a 3-taxable-year period which precedes such quarter does not exceed $1 million; and
  • Experiences a full or partial suspension of operations due to a governmental order or experiences a significant gross receipts decline

While ERTC is now terminated, effective September 30, 2021, business owners can still claim ERTC for prior quarters by filing amending quarterly employment tax returns. Business owners should consult with their tax accountants to determine their eligibility for the ERTC.