The Infrastructure Investment and Jobs Act, enacted on November 15, 2021, included an early termination of the Employee Retention Tax Credit, ending the program, except for recovery startup businesses, on September 30, 2021. Given the retroactive nature of the early termination, some taxpayers may have utilized one of the available options to claim those tax credits in advance during the fourth calendar quarter. New IRS guidance released on December 6 discusses the requirements to repay those amounts and the penalty relief available.
Taxpayers have had two options for accelerating the benefit from ERC: 1. Using form 7200 to request an advance payment of credit; or 2. By reducing current employment tax deposits. IRS Notice 2021-65 explains that taxpayers who used either of these methods during the fourth quarter must now repay these amounts.
Employers who requested and received an advance payment using form 7200 must pay the advance back, “by the due date for the applicable employment tax return that includes the fourth calendar quarter of 2021.” Failure to make this payment may result in penalties.
However, employers who reduced payroll tax deposits due on or before December 20, 2021, for wages paid on or after October 1, 2021, the amounts must now be paid “on or before the relevant due date for wages paid on December 31, 2021 (regardless of whether the employer actually pays wages on that date).”
The result is that there are two different deadlines depending on the type of advance payment a given taxpayer utilized.
It is important to note that none of the changes apply to businesses that qualify under the new recovery startup business rules which are still in effect for the third and fourth quarters of 2021.
About the Author- Max Shenker is Vice President of Government Affairs and Compliance. He works closely with enterprise accounts, develops service enhancing systems, and has worked closely with industry groups influencing federal and state tax policy. Max is an officer of the Executive Board of the National Employment Opportunity Network (NEON).