President Biden signed the $1 trillion bipartisan Infrastructure Investment and Jobs Act on Nov. 15. This infrastructure bill does contain a few tax provisions.
The Infrastructure Investment and Jobs Act terminates the employee retention tax credit (ERTC) for most employers earlier than expected. The credit will cease after Q3 of 2021 for employers other than startup recovery businesses. A startup recovery business is defined as a business that began conducting any trade or business after February 15, 2020, had average annual gross receipts not exceeding $1 million and does not otherwise qualify for the ERTC either by full or partial closure or significant decline in gross receipts requirements.
Now that we are in Q4 2021, a business will not be eligible for the ERTC, unless the employer qualified under prior rules satisfying the Startup Recovery Business rules.
Because of this early termination of the ERTC credit, employers that monetized credits for Q4 to reduce employment tax deposits will be required to repay these amounts. It is not clear whether the IRS will impose late deposit penalties and interest. The IRS normally claims no ability to abate interest but can abate a penalty based on reasonable cause. We expect the IRS will provide notification of a penalty waiver procedure for this situation.
We expect that there will be major tax provisions on the Biden Administration’s agenda that are still under consideration within Build Back Better Act. We will update you when we have more details.
If you have questions, contact your tax advisor or fill out our contact us form for further discussion.