An infrastructure measure recently unveiled by the Senate would end a pandemic tax break for businesses three months earlier to raise funds.
Some businesses can currently claim a refundable payroll tax credit – the Employee Retention Credit – on a portion of workers’ wages paid until January 1, 2022.
The $ 1 trillion law on infrastructure investment and jobs would shorten the period. Employers could claim the tax credit on wages paid until October 1, according to the text of the bipartite legislation.
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The bill would allocate money to roads, bridges, public transportation, broadband, rail, water and airports across the country. The Senate could vote on the measure as early as this week.
However, the legislation maintains the existing timetable for “start-up stimulus” businesses. These are companies that started their activities after February 15, 2020 and have an annual turnover of less than $ 1 million.
Employee retention tax credit
The employee retention credit was created by the CARES Act in March 2020 to provide an incentive for struggling employers to keep workers on their payroll during a period of mass layoffs.
It has been extended a few times, most recently by the US bailout, which offered tax relief until 2021.
The refundable tax credit is available to private sector employers and tax-exempt organizations that have lost important business or had to totally or partially suspend their activities during the Covid pandemic due to government restrictions.
Businesses can get up to $ 7,000 per quarter, or $ 28,000 per employee in 2021. (Businesses can deduct 70% up to $ 10,000 of eligible wages paid per employee each quarter, which equals 7,000 $.)
The infrastructure bill, if passed, would cut that time frame by a quarter – allowing for maximum tax relief this year of $ 21,000 per worker.
Employers are eligible in 2021 if their gross revenues have fallen more than 20% in one quarter compared to the same period in 2019 – before the pandemic.
This could apply to more businesses than in 2020, when businesses had to suffer a 50% drop in sales to get the tax break. Businesses were also eligible for less credit (up to $ 5,000 per employee per quarter) in 2020.
Businesses can still apply for a 2020 credit but must amend their tax returns to do so.