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Update Employee Retention Credit


Rödl & Partner Tax Matters Volume 2022-1, published January 25, 2022

As mentioned in Rödl Tax Matters Volume 2021-4, the Employee Retention Credit was originally extended through the end of 2021 under the American Rescue Plan Act. However, the Infrastructure Investment and Jobs Act enacted on November 15th, 2021, amended Section 3134 of the Internal Revenue Code and terminated the Employee Retention Credit as of September 30th, 2021. Only recovery startup businesses remained eligible through the end of 2021.

The IRS released Notice 2021-65 in response to the statutory changes to provide guidance for taxpayers, who were unaware of the change. Employers, who requested and received advance payments of the Employee Retention Credit for the 4th quarter of 2021 prior to the enactment of the Infrastructure Investment and Jobs Act need to repay the excess advance payments by the due date of the applicable employment tax return. The IRS may assess a failure to pay penalty if advance payments are not repaid. Additionally, reduced deposits of Employment Taxes which represented the anticipated Employee Retention Credit for the 4th quarter may be subject to failure to deposit penalties. The IRS grants penalty relief if the employer reports the tax liability that results from the termination of the applicable employment tax return for the period October 1st – December 31st, 2021. Additionally, taxpayers can request reasonable cause relief if they receive a penalty notice.

If you have any questions, please contact your Rödl & Partner representative.

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Any tax and/or accounting advice contained herein is based on our understanding of the facts, assumptions we have been asked to make, and on the tax laws and/or accounting principles in effect as of the date of this advice. No assurance is given that the conclusions would be the same if the facts or assumptions change, or are not as we understand them, or that the tax laws and/or accounting principles will not change subsequent to the issuance of these conclusions. In addition, we do not undertake any continuing obligation to advise on future changes in the tax laws and/or accounting principles, or of the impact on the conclusions herein.

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