New ERC Correction Program for Third Party Payers
Over the last few weeks, the IRS has issued several updates about the Employee Retention Credit (ERC). Information had been scarce since the agency announced a claims processing moratorium last year, but that all changed in early August. The first update highlighted the results of the year-long claims review process along with various data points. It also included the welcome news that certain low-risk claims would start being paid immediately. This was followed by the news of a second Voluntary Disclosure Program (available through November 2024) for ineligible claims filed for the 2021 year. Then late last week, the IRS announced a new correction program to help those that used a third party payer to file their ERC claim. The program provides welcome relief to those unable to seek resolution individually. To help clients, prospects, and others, Klatzkin has provided a summary of the key details below.
Supplemental Claims Process
This new program is designed to help those businesses that relied on a third party payer (TPP) to submit an ERC claim. These companies have been designated to pay outstanding federal unemployment and other taxes on behalf of the company. As part of the service, many handled the ERC submission process as well. Unfortunately, this has created issues for these taxpayers because only the TPP is permitted to adjust, update, and make corrections to the claim. This new program allows TPPs that file claims for multiple clients to request a withdrawal when appropriate without impacting other legitimate claims.
A supplemental claim filed by the TPP is a formal request not to process the outstanding employment tax return for an indicated period. The IRS will treat claims filed prior to the supplemental claims as if they do not exist.
Program Eligibility
Only certain TPPs are eligible to participate. Those that meet ALL the criteria below are eligible:
- Those that filed claims which aggregated the ERC for itself/client using the TPP’s Employer Identification Number (EIN).
- The claim was made on an adjusted employment tax return.
- None of the initial claims which the TPP is including as part of the supplement claims have been processed by the IRS.
It is important to note that TPPs which received the full amount of the ERC claimed (as refund or credit) are not eligible to participate. The IRS recommends investigating the second Voluntary Disclosure Program to resolve the issue.
Submitting a Claim
A TPP must submit one supplemental claim for each tax period filed before January 31, 2024. The claim should include the correct credit amount and any other changes as appropriate. Adjustments should be made using the appropriate adjusted employment tax return depending on the client’s entity type. It is important to remember not to includes any credit amounts filed after January 31, 2024.
All claims must be submitted to the IRS’s Supplemental Claim for ERC Fax Line at 855-782-2161. The deadline for submission is no later than 11:59pm on November 22, 2024.
Contact Us
The new program provides relief for taxpayers that filed a claim through a TPP. Until now, many of the resolution programs have been only for those companies that filed directly with the IRS. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Klatzkin can help. For additional information call 609-890-9189 or click here to contact us. We look forward to speaking with you soon.