The federal government has told tens of thousands of small businesses that it is time to stop – If your business has been claiming the Employee Retention Tax Credit (ERTC) for wages paid this year, the much-needed relief is over.

The infrastructure bill ends the ERTC for wages paid after September 30, 2021—which is one calendar quarter earlier than the expected end date of December 31, 2021.

It’s estimated that the federal government will save more than $8 billion by ending the ERTC early.

The Employee Retention Tax Credit was originally designed to help keep employees on company payrolls throughout the COVID-19 pandemic and had the potential to be a large source of financial relief for eligible businesses.

Revisions to ERTC

The ERTC was originally scheduled to run through December 31, 2021. With the passage of the infrastructure bill, the ERTC goes away retroactively and end on September 30, 2021—the end of the third quarter.

This effectively reduces the incentive per employee for the year from $28,000 to $21,000.

Changing the rules in the middle of a tax year could complicate matters for both the IRS and businesses still relying on the credit.

With early termination, how much relief can a business expect in 2021?

In 2021, eligible employers with 500 or fewer employees can claim 70% of the first $10,000 in qualified wages for each employee in every quarter. It is a refundable, advanceable credit that will cover up to $7,000 in wages per quarter or $21,000 per year for each employee.

While many businesses applaud the passage of the infrastructure bill, they are also requesting that Congress take action to ensure access to ERTC throughout the end of the year.

With reinstatement unlikely, some analysts recommend that businesses, if they haven’t already, take a hard look at whether they qualify for ERTC for the first three quarters of 2021 (and 2020).

Approximately 70% of businesses qualify for ERTC either because of a reduction in revenues or material impact.

Be sure to check if your business qualifies; if so, retroactively take advantage of the benefits available for the first three quarters of 2021.

Need help with ERTC?

Pandemic relief programs and funds are about to disappear. If you think your business qualifies, the clock is ticking.

Do you know how to claim the ERTC for the first three quarters of 2021? Does your business need to take corrective action regarding your ERTC fourth quarter credits?

If your company needs help, Payroll Medics can assist with reviewing qualified wages, calculating the credits, and filing the necessary forms that allow you to claim your ERTC credits with the IRS. We can also help ensure you’re taking the right steps to maintain compliance.