Infrastructure investment and jobs act ends employee retention credit for fourth quarter of 2021

On November 15, 2021, President Biden signed “The Infrastructure Investment and Jobs Act” into law. As part of the Act, the employee retention credit (with the exception of the recovery startup business credit) is no longer in effect for the fourth quarter of 2021. A few things for taxpayers to consider:
  • For taxpayers who have already claimed credits for the fourth quarter of 2021, the IRS is expected to issue guidance on how to handle these credits.
  • The employee retention credit for recovery startup businesses is still in effect for wages paid from July 1, 2021 – December 31, 2021. Employers that qualify are eligible for a maximum credit of $50,000 per quarter.
  • The employee retention credit is in effect for wages paid from March 13, 2020, to September 30, 2021. Taxpayers have five years to file claims for the employee retention credit under the extended statute of limitations.
  • The maximum credit eligible (excluding recovery startup businesses) is now $26,000 per employee if a business qualified for each eligible period. These credits can still be claimed on amended payroll tax returns for qualified periods.

Mazars’ Insight

The employee retention credit is a taxable credit, meaning taxpayers must add the amount of the credit to taxable income for the year in which the wages are paid that generated the credit. This may require the amending of prior year income tax returns to claim the credit. Additionally, taxpayers need to keep in mind the interaction of the employee retention credit with other incentive programs such as the Paycheck Protection Program(“PPP”), Research Credit, and Work Opportunity Tax Credit.

Please contact your Mazars professional for additional information.

Published on November 15, 2021