We join the National Council of Nonprofits in Urging Action to Restore the ERTC and avoid Retroactive Employer Liabilities
The National Council of Nonprofits is supporting efforts to reinstate the ERTC
Provide Nonprofit ERTC Relief Now!
Co-sponsor H.R. 6161
The Build Back Better bill currently does not include reinstatement of the Employee Retention Tax Credit, a high priority of the charitable nonprofit community, and a benefit that was eliminated for the fourth quarter of 2021 by way of the bipartisan infrastructure bill signed into law on November 11. Nonprofits have been counting on the refundable payroll tax credit of up to $7,000 per employee this quarter to afford to retain staff and avoid additional layoffs. Representatives introduced the Employee Retention Tax Credit Reinstatement Act (H.R. 6161) to restore the important incentive. See the news release and current list of nonprofits and other employers endorsing the legislation.
In short, the ERTC allowed employers to immediately take the credit against their federal tax withholding liabilities by reducing those periodic payments to Treasury. The Retroactive repeal on Nov. 15 for the entire 4th quarter means that employers who legally reduced payments by the amount of the credit they were earning (to help support for employee hires or retention) now have to pay back those amounts dating back to the beginning of October.
The below explains the current situation for employers – how to avoid penalties now due for taking the benefits under a law repealed retroactively
– “The IRS has provided some penalty relief regarding the retroactive early termination of the employee retention credit provided in infrastructure legislation. IRS Notice 2021-65, 2021-51 IRB 1, released December 6, provides guidance for employers that received advance payments of the ERC or reduced employment tax deposits in anticipation of receiving the credit for the fourth quarter of 2021, before the retroactive early end of the ERC enacted in the Infrastructure Investment and Jobs Act (P.L. 117-58)
The bill, signed into law November 15, eliminated the ERC for the fourth quarter of 2021 for all businesses except recovery start-ups, changing the end date of the credit from December 31 to September 30.
The notice explains that employers that received advance fourth-quarter ERC payments will avoid failure-to-pay penalties if they repay the erroneous amounts by the due date of their applicable tax returns. Penalties will also be waived for employers that reduced their fourth-quarter employment tax deposits before December 21 if the amounts originally withheld are deposited by December 31, the tax liability resulting from the termination of the ERC is reported on the appropriate tax return, and the reduced deposits were in accordance with the rules in Notice 2021-24, 2021-18 IRB 1122.”