The Infrastructure Investment and Jobs Act (IIJA) signed into law in November of 2021 retroactively ended the Employee Retention Credit (ERC) as of September 30, 2021. Taxpayers who took the ERC for the fourth quarter of 2021 prior to the passage of the IIJA can repay the credit by filing Form 941 “Employer’s Quarterly Federal Tax Return” by its applicable due date.
The IRS also issued guidance on the ERC in IRS Notice 2021-65 released on December 6, 2021. This Notice indicated that Employers could avoid failure to pay penalties for any advance payments of the ERC taken for the 4th quarter of 2021 if they repay these amounts by the due date for their applicable employment tax return covering the fourth quarter. Failure to deposit penalties can also be waived if the deposits were to have been made prior to December 20, 2021, were not made because the employer anticipated being able to take the ERC, and the employer reports the liability from the termination of the ERC on its 4th quarter 2021 tax return. Form 941 for the 4th quarter of 2021 is due on January 31, 2022.