Under the Infrastructure Investment and Jobs Act, which was enacted on November 15, 2021, the Employee Retention credit was retroactively eliminated for the fourth quarter of 2021 for most taxpayers. Previous amendments to the CARES Act allowed for eligible employers to use the credit for wages paid before January 1, 2022.
New Employee Retention Credit Guidance
On December 6 the IRS released guidance with respect to late deposit penalties for those employers who reduced the employment tax deposits in anticipation of offsetting their liability with this credit and also for those who received advance payments on their fourth-quarter payroll liabilities.
Employers who received advanced payments for fourth-quarter 2021 will avoid failure to pay penalties if they repay the liability by the due date of the employment tax returns. In most instances this will be January 31, 2021.
Prior to the enactment of the Infrastructure Investment and Jobs Act, employers may have reduced deposits of Employment taxes by the amount of the employee retention credit that was anticipated for the fourth quarter of 2021. Employers who reduced deposits for wages paid on or before December 20, 2021, in anticipation of using the Employee Retention Credit will not be subject to a failure to deposit penalty if they deposit those amounts on or before the due date for wages paid on December 31, 2021. The due dates will vary based on the deposit schedule of the employer.