IRS offers relief for retroactive termination of ERC


The IRS has provided relief (Notice 2021-65) for taxpayers who underpaid employment tax deposits due to the retroactive termination of the employee retention credit (ERC) by the Infrastructure Investment and Jobs Act (the “Infrastructure Act”).

The Infrastructure Act ended the ERC with for wages paid after Sept. 30, 2021, for all employers other than recovery startup businesses, but was not enacted until Nov. 15, 2021. Notice 2021-65 provides relief for employers who reduced employment tax receipts or received an advance payment in anticipation of claiming the ERC for wages after Sept. 30, 2021—but are now ineligible for the credit due to the change in the law. The notice also provides guidance regarding how the rules apply to recovery startup businesses during the fourth quarter of 2021.

Employers that received advance payments for 2021 fourth quarter wages by filing Form 7200 can avoid failure-to-pay penalties if they repay those amounts by the due date of their applicable employment tax returns for the 2021 fourth quarter, which, for Form 941 filers are generally due no later than Jan. 31, 2022. Employers that reduced employment tax deposits on or before Dec. 20, 2021, for wages paid during the 2021 fourth quarter in anticipation of the ERC will not be subject to the failure to deposit penalty with respect to the retained deposits if, among other requirements specified in the notice, employers deposit the amounts initially retained in anticipation of the ERC on or before the relevant due dates for wages paid on Dec. 31, 2021, regardless of whether the employer actually pays wages on that date. The IRS noted that the applicable deposit due dates will vary based on the deposit schedule for the employer.

The notice also provides that if an employer does not qualify for relief under the terms of the notice, the employer may reply to a notice about a penalty with an explanation and the IRS will consider reasonable cause relief.




To learn more visit




Tax professional standards statement

This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.


More tax hot topics