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Employee Retention

Can the Employee Retention Credit Return?


Because the early termination of the ERC is retroactive, some companies may have utilized one of the available options to claim those tax credits in advance, during the fourth calendar quarter. New IRS guidance released on December 6 discusses the requirements to repay those amounts and the penalty relief available.

Dec 10th 2021
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A bipartisan group of Congressional representatives—including Stephanie Murphy (D-FL), Terri Sewell (D-AL), Carol Miller (R-WV), and Kevin Hern (R-OK)—introduced H.R. 6161, the “Employee Retention Tax Credit (ERTC) Reinstatement Act,” to undo the early termination of the ERC that was enacted by the Infrastructure bill on November 15.

The new bill would simply reinstate the ERC, now retroactively, for the fourth quarter of 2021. To become law, the text of this bill would need to be incorporated into a larger piece of legislation, such as the Build Back Better bill.


About the Employee Retention Credit

The Employee Retention Credit is a fully refundable tax credit for eligible employers that paid qualified wages (including allocable qualified health plan expenses) to employees during the COVID-19 pandemic. The credit, initiated via the CARES Act, applied to qualified wages paid after March 12, 2020, and before January 1, 2021.

For that period, the maximum amount of qualified wages considered with respect to each employee for all calendar quarters is $10,000, and the credit is 50 percent of qualified wages for a maximum credit of $5,000 per employee. The Consolidated Appropriations Act of 2021 and the American Rescue Plan Act (ARPA) extended this credit for wages paid on or after January 1, 2021 and before December 31, 2021.

The new legislation also increased the qualified wages and credit percentage to 70 percent of $10,000 for each calendar quarter, for a possible credit of up to $28,000 per employee. As mentioned above, the Infrastructure Investment and Jobs Act limited this period to wages paid before October 1, 2021, thus reducing the possible credit to $21,000 per employee.

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