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One of the provisions of the recently passed Infrastructure Investments and Jobs Act is the elimination of the Employee Retention Credit (ERC) for Q4 2021. There is an exception for companies founded after February 15, 2020 (known as recovery start up businesses).

The termination of the credit for the fourth quarter payrolls was anticipated based on an August notice from the Internal Revenue Service (IRS) that extended the Employee Tax Credit through Q3 and Q4, but warned that pending legislation – now passed – could impact the credit.

Eligible businesses may still claim the Employee Retention Credit on qualified wages paid from March 13, 2020 through September 30, 2021. Recovery startup businesses may claim the ERC from July 1, 2021 through December 31, 2021, but are only eligible for a maximum of $50,000 of credit per quarter.

The new maximum credit per employee that a company may claim is now $26,000 – assuming eligibility for the maximum $5,000 combined for all quarters of 2020 plus $7,000 per quarter for Q1, Q2 and Q3 of 2021. Employers who are eligible for the ERC in 2021 should be mindful that their Paycheck Protection Program Round 2 forgiveness applications are due in the coming months. Maximizing the interplay between the ERC and the PPP Round 2 forgiveness can yield a “best of both worlds” result for eligible companies.

Please be sure to contact Gray, Gray & Gray at (781) 407-0300 to assess your eligibility and to help maximize stimulus opportunities available to your organization.