With the recent passing of the $1 trillion infrastructure bill, otherwise known as the Infrastructure Investment and Jobs Act (IIJA), there have been some changes to the Employee Retention Credit (ERC). Most notably, that the credit is no longer available for most employers for any wages paid in the fourth quarter of 2021. The only exception being if the employer qualifies as a recovery startup business.
To qualify as a recovery startup business, an employer must have started operations after February 15, 2020 and have average annual gross receipts for the prior three years of no more than $1,000,000. If an employer qualifies as a recovery startup business, it would be eligible for the ERC for third and fourth quarter of 2021, even if it does not otherwise meet the ERC eligibility requirements for claiming the credit. The maximum amount of the credit is $50,000 per quarter for a total of $100,000.
The ERC provides a great opportunity for employers to claim available funds. It is important for businesses to take a look to see if they might have been eligible for the credit in either 2020 or 2021. The claim for the credit is made on Form 941, but even if a claim was not made when it was originally filed, there is a three year window to go back and amend to make the claim.
For more background on the ERC, you can reference our prior articles from the January and March newsletters or the IRS website. Please also feel free to reach out to Shelby Graham (firstname.lastname@example.org) or your SDK advisor if you have any questions.