Say Goodbye to the ERC for the Fourth Quarter

Tax Planning

Regarding the employee retention credit (ERC): lawmakers giveth, and lawmakers taketh away.

In this case, what lawmakers did is pitiful. It’s like magic: now you see it, now you don’t.

On March 11, 2021, the American Rescue Plan Act of 2021 became Public Law 117-2. This new law extended the ERC to the third and fourth quarters of 2021.

On November 15, 2021, the Infrastructure Investment and Jobs Act became Public Law 117-58 and ended the ERC three months early, retroactive to September 30, 2021.

You cannot consider any retroactive repeal of a tax law to be good tax policy. And this retroactive repeal was done only nine months after passage. It is disgraceful.

You may remember that the purpose of the ERC was to encourage small businesses to keep their employees on the payroll rather than let them go.

Escapee. Lawmakers did not kill the fourth-quarter 2021 ERC for start-up businesses. That tax benefit survived. Thank goodness!

Planning point. Don’t let this bad news deter you from claiming the credit for 2020 and for the first three quarters

of 2021. You may remember that the remaining credits can add up to $26,000 per employee.

And keep in mind that there’s no mad rush—you have time. You can claim the ERC anytime during the three-year statute of limitations.

Christopher Ragain

My name is Christopher Ragain, I am the founder of Tax Planner Pro.  I love helping small business owners find creative and legal ways to beat the TaxMan.  My team and I love to write and you can find all of our insights on this blog!

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