Tax Proposal To End ERC Claims

The House Ways and Means Committee and the Senate Finance Committee have proposed a piece of bipartisan tax legislation known as the Tax Relief for American Families and Workers Act of 2024. The proposed legislation includes significant modifications to the Employee Retention Credit (ERC) program, including a cut-off date of Jan. 31, 2024, for new ERC claims.

Note that this is proposed legislation only, and opinions vary on the likelihood of passage. However, because ERC claims dramatically impact certain taxpayers, immediate action may need to be taken.

New Cut-Off Date

Current law generally allows taxpayers to file an ERC refund claim for 2020 by April 15, 2024, and claims for 2021 by April 15, 2025. The proposed legislation would change the cut-off to Jan. 31, 2024. Meaning, any taxpayer planning to file a new ERC refund claim now has less than two weeks to do so. Thus, taxpayers are advised to finish preparation of their ERC refund claims as soon as possible in order to meet the proposed Jan. 31 deadline.

Recommended Next Steps

Whether taxpayers have already filed ERC refund claims or are still considering whether to file, the following recommendations should be considered regarding documentation of the filing date.

• If a claim has not yet been filed, it should be filed by Jan. 31, 2024, to ensure the claim will be accepted. This is a precautionary step to protect the claim in case the proposed legislation passes.
• Filing the ERC claim often requires coordination between an accountant or a consultant who calculates the credit and the payroll provider who files Form 941-X. If a taxpayer has provided a payroll provider with information to amend a tax return, confirm with the payroll provider that it has been filed.
• If a taxpayer has filed a claim (or a payroll provider did so on the taxpayer’s behalf), confirm in that either the E-File confirmation or the certified mail receipt is in the taxpayer’s possession. The IRS has struggled with processing these claims, and should the IRS lose a claim, without proof of filing the taxpayer would be without options.
• If proof of filing cannot be found, a taxpayer should call the IRS and try to confirm that the IRS has received the claim(s). (This step may not be particularly helpful if a claim was filed in the last 1-2 months as the IRS may not yet have logged receipt.)

Other Important Considerations

There has not been any indication that this bill would impact the recently announced voluntary disclosure program or the withdrawal process for employers who have determined that their claim is invalid. For taxpayers interested in the voluntary disclosure program, the due date is still March 22, 2024. The IRS has not announced any deadline for the withdrawal process. It is possible that the program could be closed at any time.

KSM will continue to monitor this evolving legislation. In the meantime, reach out to your KSM advisor with questions or complete this form.