If enacted, the proposed legislation could end the ERC on January 31, 2024.
On January 17, 2024, the House Ways and Means Committee introduced The Tax Relief for American Families and Workers Act of 2024, which, among other things, significantly moves forward the deadline for the Employee Retention Credit (ERC) claim submissions date to January 31, 2024. This new, much earlier, deadline applies to ALL ERC claim submissions, including for 2021 calendar quarters. As it stands now, without the proposed legislation, the claim submission dates are April 15, 2024 (for 2020 claims) and April 15, 2025 (for 2021 claims).
The ERC is a refundable tax credit originally enacted to mitigate the COVID-19 pandemic as part of the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The credit was intended to enable employers to continue to pay employee wages despite government-ordered business shutdowns and travel restrictions or a significant decline in gross receipts during the eligibility periods. The ERC has specific eligibility requirements and may apply to qualified wages paid between March 13, 2020, through December 31, 2021, for some businesses. To be eligible, employers must have:
- Sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel or group meetings because of COVID-19 during 2020 or the first three quarters of 2021;
- Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021; or
- Qualified as a recovery startup business for the third or fourth quarters of 2021.
The Proposed Tax Relief for American Families and Workers Act of 2024
If Enacted, the Proposed Legislation Could End the ERC on January 31, 2024
The Tax Relief for American Families and Workers Act of 2024 includes a provision to end the ERC on January 31, 2024. This legislation may or may not be enacted. ADP will continue to monitor this and other matters affecting the ERC and will keep clients apprised of material updates.
Penalties for Filing Improper ERC Claims Are Significant
The IRS has a number of ongoing ERC initiatives including increased audit work and criminal investigations for those filing dubious claims, issuance of letters to propose ERC adjustments, a claims withdrawal process for pending ERC claims, and a Voluntary Disclosure Program for those who determine that previously obtained ERC claims were improper.
To further combat fraud perpetuated by aggressive ERC promoters, the proposed The Tax Relief for American Families and Workers Act of 2024 would further increase enforcement for improper claims. Current law asserts a $1,000 penalty per person that aids, assists, or advises, in filing an understated tax liability of another person. The proposed provision separately defines an ERC promoter and increases the penalty to the greater of $200,000 or 75 percent of the gross income that the ERC promoter derived.
ADP Compliance Resources
ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page.
ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.
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Updated on January 18, 2024