ERC repealed early by bipartisan infrastructure act

As a supplement to our latest tax alert on infrastructure legislation, the employee retention credit (ERC) will no longer be available for qualified wages paid by non-recovery startup businesses after Sept. 30, 2021, once the president signs the Infrastructure Investment and Jobs Act, effective retroactively.

At this time, we recommend employers who have not deposited their share of payroll taxes or filed for an advance of the credit via Form 7200 filings for wages paid during Q4 2021 to date hold on taking immediate action, in hopes the IRS issues guidance regarding procedures for how to make these deposits or refund advance credits received.

While uncertain, we are also hopeful interest and penalties on such amounts will be waived, given they were validly pursued under the law in effect at the time. If no guidance is issued by the IRS by Nov. 19, 2021, we would recommend payment of withheld deposits at that time.

We will issue additional communications on this matter as more information becomes available.

It is critical to note this legislation does not impact the availability of the ERC in any previous calendar quarter. To the extent the credit may be pursued for a calendar quarter in 2021, we recommend planning for the 2021 income tax returns to be extended so that deductions for qualified wages can be appropriately reduced to the extent of any credits ultimately claimed (see our August tax alert for further discussion).

We encourage you to reach out to your Baker Tilly advisor regarding how any of the above may impact your tax situation.