Finally, Guidance on Paying Back 4th Quarter ERC
We have posted many times on the Employee Retention Credit (ERC) and most everyone knows that the ERC is no longer allowed for almost all farm operations for wages paid after September 30, 2021. However, this new rule did not go into effect until about November 15, 2021 and many farmers might have requested an advance of the ERC on Form 7200 or reduced their payroll taxes by the estimated amount of the ERC in the fourth quarter.
If you requested advance ERC on Form 7200 and you actually received the payment from the IRS you have until January 31, 2022 to pay this advance back. You will likely report this advance on From 943 filed in January, 2022 and pay any tax owed at that time. The IRS will be updating the instructions to Forms 941 and 943 soon to let you know how to process this payment. If you never received the advance, then nothing needs to be done (unless the IRS later sends the payment to you by mistake).
If you reduced your required withholdings for the fourth quarter by the estimated amount of the ERC, the repayment mechanism is slightly different. The employer must repay these withholdings by the relevant due date for wages paid on December 31, 2021 (even if no wages are paid on that day). This due date is based on your type of payroll tax depositor. For example, if you are required to pay in monthly, then this due date would be January 15, 2022.
We have heard little chatter from Congress about reinstating the ERC for the fourth quarter. There is a small chance that Congress could reinstate it retroactively, but we would not count on it. If it happens, we will let you know.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
It would be great if Congress would reinstate the ERC for the fourth quarter. Tree fruit & grape fall/winter wages continue to climb after a tough year.