The Internal Revenue Service issued guidance on how businesses should handle the retroactive termination of the Employee Retention Credit.
The credit was originally meant to last until the end of 2021, but in the Infrastructure Investment and Jobs Act enacted in the middle of last month, Congress changed the law so that it only applies to wages paid before Oct. 1, 2021, except for employers that are recovery startup businesses.
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Businesses that 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 they don’t actually pay wages on that date), and report the appropriate tax liability.
The early termination of the credit does not apply to recovery startup businesses; the notice also offers guidance for them.