Is Third Quarter The End of ERC
The House has finally passed the transportation infrastructure bill and President Biden is likely to sign it soon. This bill provides money for “physical” infrastructure needs along with other pet projects of Congress members.
However, there is also one key tax consideration buried in the bill that will be of concern to many farmers. Those farmers who qualify for the Employee Retention Credit (ERC) for the fourth quarter will no longer be allowed to claim the credit due to this bill. Even if you qualified in the third quarter and would automatically qualify for the fourth quarter, you are effectively disallowed from claiming the credit.
There is a chance that the ERC will be reinstated if Congress finally passes the second infrastructure bill, but there is no guarantee.
If you have already reduced your payroll tax deposits, you should likely catch up on those payments quickly. The IRS will send notices indicating you did not make these deposits timely, but you should be able to get out of any assessed penalties due to reasonable cause. The law in place allowed the ERC, the new bill disallows them. Any payroll deposits missed between October 1 and the date that President Biden signs the bill should escape any penalties but will require correspondence with the IRS which is never something to look forward to.
Speaking of penalties, we continue to hear that the IRS is sending notices to taxpayers requesting Form 941s or 943s. The IRS sees that deposits are made but no filing has been received by their processing center. In almost all cases, the forms were originally filed either by mail or by electronic filing, but the IRS is so backed up that they can’t get them processed timely or the forms are sitting in a room somewhere unopened.
If you get these notices, simply respond to them with a copy of the original filing and a cover letter indicating that they were timely filed, etc. Dealing with the IRS will continue to have issues due to COVID and this is just another example of how far behind their processing is.
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.
We called the IRS on a 943 notice and the agent said the 943 had been processed. She recommended calling the IRS before sending a copy in to see if the 943 has been processed yet. So maybe the IRS is catching up a bit…..