House Passes Bill to End the Employee Retention Credit (ERC) and Enhance ERC Enforcement

The U.S. House of Representatives has passed a bill aimed at ending the Employee Retention Credit (ERC) and enhancing the federal government’s ability to hold promoters and business owners accountable. While the ERC was a pandemic-era relief program, eligible businesses can still file claims retroactively (although the IRS currently has a moratorium on processing new claims), and the program proved to be a prime target for fraud. Here, Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what business owners in Massachusetts need to know:

Proposed Tax Relief for American Families and Workers Act of 2024 Would End the ERC

The bill, known as the Tax Relief for American Families and Workers Act of 2024, would permanently end the ERC program. In its current form, the bill states that, “no credit or refund of any COVID-related employee retention tax credit shall be allowed or made after January 31, 2024, unless a claim for such credit or refund is filed by the taxpayer on or before such date.” Since we’re already past January 31, this means that the Tax Relief for American Families and Workers Act of 2024 would effectively end the ERC program immediately upon its enactment—most likely without the IRS’ moratorium expiring in the interim.

A Longer Statute of Limitations for ERC Fraud Enforcement

In addition to ending the ERC program, the proposed Tax Relief for American Families and Workers Act of 2024 would also extend the statute of limitations for ERC-related assessments from five years to six years. This six-year limitations period would run from the latest of:

• The date on which the return containing the ERC claim was filed;
• The date on which the return is treated as filed under Section 5601(b)(2) of the Internal Revenue Code; or,
• The date on which the claim for a credit or refund under the ERC program is made.

With this “latest of” provision, businesses that received ERC credits or refunds in 2023 could face scrutiny from the federal government through 2029.

Enhanced Penalties for Promoters of Fraudulent ERC Filing Schemes

The proposed Tax Relief for American Families and Workers Act of 2024 includes several provisions designed to help the IRS and DOJ target promoters of fraudulent ERC filing schemes. These schemes were a major source of ERC fraud, and federal authorities are aggressively targeting promoters while also holding taxpayers accountable. Among other things, the proposed law substantially increases the penalties for promoting fraudulent ERC filing schemes and makes the most severe penalties retroactive to March 12, 2020.

Request a Confidential Consultation with Boston Tax Lawyer Kevin E. Thorn

If you need to know more about ERC compliance or the federal government’s ongoing efforts to target ERC fraud, we encourage you to contact us promptly. We represent businesses and individuals in both civil and criminal ERC-related matters involving the IRS and other federal authorities. To request a confidential consultation with Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989 or inquire online today.