The Internal Revenue Service (IRS) recently announced a new program that aims to help business owners address incorrect claims for the Employee Retention Credit (ERC). The program focuses specifically on third-party payers. Third-party payers are those who handle payroll taxes for other businesses. The agency states that the program is meant for certified professional employer organizations, professional employer organizations, and IRC Section 305 agents.
Third-party payers may consider using this program if they believe their client(s) qualified for this credit, only to later realize the error. This new program allows third-party payers to “withdraw” clients who did not actually qualify for the credit while allowing other clients who did qualify to remain. It is available for those who filed claims on or before January 31, 2024.
How does it work?
The third-party payer would use a supplemental claims process to take part in the program. This allows the third-party payer to make the correction before the agency processes the claim.
How do I know if our ERC claim was incorrect?
The IRS notes that warning signs of an incorrect ERC claim can include:
- Operation of an essential business. Essential businesses generally did not qualify for this tax benefit. This is because they were not suspended by a government order.
- Employment of family members. Wages to family members are generally not qualified for the purposes of the ERC.
- Forgiveness under the Payroll Protection Program (PPP). Those who received PPP loan forgiveness related to payroll costs likely do not qualify for ERC for those same expenses.
These are just a few of the most recent red flags that can signal an erroneous ERC claim.
What is the best option if I believe we made a mistake on these forms?
Every situation is different and should be handled with care. It is important to take the matter seriously to avoid unforeseen consequences. In extreme cases, this can include allegations of an intentional attempt to avoid tax obligations. The attorneys at Goldburd McCone have experience with these matters. Legal counsel can review your case, discuss your options, and advocate for your interests so you can focus on meeting your bottom line.