Employer Retention Credit (ERTC) – Retroactive change

President Biden recently signed the Infrastructure Investment and Jobs Act (IIAJ) retroactively ending the Employer Retention Tax Credit (ERTC). This applies only through September 30, 2021 (rather than through December 31, 2021), unless the employer is a recovery startup business. As a result of retroactive termination of the ERTC, you may need to review your payroll tax compliance (including tax deposits) to make sure that it conforms with these changes. If you were using the ERTC to offset federal tax deposits, you may be underpaid for the fourth quarter and will need to make a catchup payment. If the catchup payment is made, IRS is expected to provide penalty relief.

Another tax treatment you may need to be aware of in regards to ERTC is the reporting of the credit on the entity tax return. The ERTC credit generated from amended payroll returns for periods in 2020 must reduce wages when filing your entity return. Because the amended payroll reports were submitted in 2021 this may not have been reported properly on your 2020 entity return. Please consult with your HK Tax Advisor for a course of action. 330-453-7633 or info@hallkistler.com.

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