New infrastructure law ends ERC – retroactively

Employers can no longer claim a tax credit on Form 941 for keeping workers on the payroll. In fact, a new law has discontinued the employee retention credit (ERC) retroactively.

The Infrastructure Investment and Jobs Act, signed by President Biden on Nov. 15, 2021 ends the ERC – effective Sept. 30, 2021.

Ongoing legislative changes

Add this legislation to the list of laws employers have had to keep track of as they’ve calculated “qualified wages” and completed Form 941 each quarter. Here’s a recap of where we’ve been:

• The Coronavirus Aid, Relief, and Economic Security Act created the ERC during the pandemic in 2020.
• The ERC had an expiration date of Dec. 31, 2020. Just a few days before that, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 pushed the date to June 30, 2021.
• Then the American Rescue Plan Act set Dec. 31, 2021 as the end date.
• That date got erased by the Infrastructure Investment and Jobs Act, which made the last day of the third quarter the expiration date instead.

Problems with ERC in fourth quarter

What about employers that have already adjusted their tax deposits or submitted Form 7200, Advance Payment of Employer Credits Due to COVID-19, for the fourth quarter?

We’re watching to see what guidance IRS may provide on this and whether a revised Form 941 and Form 941-X will be issued for the fourth quarter of 2021.