After the Infrastructure Investment and Jobs Act eliminated the employee retention credit (ERC) for wages paid after September 30, 2021, employers who received Q4 2021 ERC advance payments became obligated to repay these advanced amounts.
Repayment of Q4 2021 ERC advance payments is due by January 31, 2022. Employers must also report the advance payment amount on Form 941 (Employer’s Quarterly Federal Tax Return), Part 1, line 13h.
In the absence of IRS guidance on the matter, the repayment amount cannot be offset by any ERC refunds the employer is expecting.
The only employers that do not need to repay Q4 2021 ERC advance payments are “recovery startup businesses” (RSBs), which were allowed under the Act to continue to claim the credit through the end of 2021. An RSB is defined as one that:
- began carrying on any trade or business after February 15, 2020, and
- has average annual gross receipts that do not exceed $1 million for the 3-year period ending with the tax year that precedes the calendar quarter for which the ERC is calculated.
If you have any questions about repaying or reporting Q4 2021 ERC advance payments, please contact your Grassi advisor or Robert Tobey, Tax Partner.