On Nov. 15, 2021, President Biden signed the Infrastructure Investment and Jobs Act (IIJA), a $1.2 trillion spending bill to subsidize roads repair, public transportation, utilities and clean energy initiatives. One source of funding is a retroactive change to the applicable period for which employers can claim the Employee Retention Credit (ERC).
Previously, employers could utilize wages paid before Jan. 1, 2022 to calculate and claim the ERC. For 2021 calendar quarters, the credit was, and still is, 70 percent of “qualified wages” per employee per quarter (up to $10,000 in “qualified wages”).
WHAT IS CHANGING
IIJA section 80604 modifies IRC section 3134 to redefine “qualified wages” as those paid after June 30, 2021 and before Oct. 1, 2021 or, in the case of a “recovery startup business,” wages paid after June 30, 2021 and before Jan. 1, 2022. This change applies to calendar quarters beginning after Sept. 30, 2021.
Additionally, the definition of “recovery startup business” was modified to mean an employer that began a trade or business after Feb. 15, 2020 and has gross receipts under $1,000,000.
This means that employers cannot claim the ERC for Q4 of 2021 unless they specifically qualify as a “recovery startup business.”
GHJ recommends speaking with a tax advisor regarding questions about the ERC.
The ERC is complex and nuanced. If you have any questions about the ERC, the proposed changes or their impact on you or your business, please contact the tax advisors at GHJ.