Employee Retention Credit (ERC) Termination: IRS Guidance

Please note: This blog is current to the date of its publication, Monday, Dec. 13, 2021. For additional updates or guidance, please contact SST.

In Q3 2021, the Internal Revenue Service (IRS) terminated the Employee Retention Credit (ERC) a quarter early through the enactment of the Infrastructure Investment and Jobs Act, P.L. 117-58. Recently, more guidance related to the termination was shared in Notice 2021-65. Below are some key takeaways to help you and your organization better understand this critical development:

  1. Q4 2021 wages are not eligible for ERCs.
  2. Organizations can still apply for ERCs (for both 2020 and 2021) via Form 941-X for three years after the original Form 941 was filed.
  3. Organizations can maximize 2020 ERCs for up to 50% of the $10,000 eligible wages per employee for the year, totaling $5,000 per employee.
  4. Organizations can maximize 2021 ERCs for up to 70% of the $10,000 eligible wages per Q1-Q3, totaling $21,000 per year, per employee.
  5. Organizations cannot use the same compensation expense for both ERCs and PPP loan forgiveness.

For additional information about the early termination of ERCs, you can read the IRS’ original notice here. We also recommend this recent article from AICPA’s Journal of Accountancy, a trusted resource for everyone at SST. Additionally, our experts are always available to provide further assistance, including ERC consults and filing. Contact us today.