The Infrastructure Investment and Jobs Act (Infrastructure Act) ended the Employee Retention Credit (ERC) for wages paid after September 30, 2021 for many employers.  While Recovery Startup Businesses are still permitted to claim ERC benefits for qualifying wages paid through the remainder of 2021, employers that did not meet this definition are precluded from claiming Q4 2021 ERC benefits.  However, as the provisions of the ERC allowed employers to either (1) claim advance payments and/or (2) reduce employment taxes by the anticipated ERC, the Internal Revenue Service (IRS) issued Notice 2021-65 to provide guidance for employers that utilized either methodology during Q4 2021.

Repayment of Advance Payments

  • Non-Recovery Startup Businesses must repay any Q4 2021 advance payments by the due date of the applicable employment tax return that includes Q4 2021.

Reduced Employment Tax Deposits

  • The IRS will no longer waive failure to deposit penalties on employment taxes for Non-Recovery Startup Businesses after December 20, 2021.
  • Non-Recovery Startup Businesses that reduced employment deposits in anticipation of ERC benefits can avoid failure to deposit penalties for deposits due on or before December 20, 2021 with respect to wages paid during Q4 2021 if:
    • The employer deposits the amounts initially retained in anticipation of the Q4 2021 ERC benefits by December 31, 2021; and
    • The employer reports the tax liability resulting from the Q4 2021 ERC termination on the applicable employment tax return that includes Q4 2021.

Employers that do not qualify for relief under this notice may also seek penalty relief under the reasonable cause provisions of IRC Sec. 6656(a).

Sax will continue to update you as further details are made available.  Reach out to your Sax advisor or email [email protected] with questions.  For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.

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