IRS Updates on Employee Retention Tax Credits for Certified PEO's

IRS Updates on Employee Retention Tax Credit (ERTC) – What You Need to Know"

Introduction:

Over the past week, the IRS has been busy issuing updates and guidance on the Employee Retention Tax Credit (ERTC or ERC). As a business owner or HR professional, it's crucial to stay informed about these developments, as they can have a significant impact on your financial planning and compliance efforts. In this blog post, we'll break down the key announcements from the IRS and provide insights into what they mean for your business.

IRS Issues Memorandum on Certified PEO (CPEO) Liability for ERTC:

The IRS recently sent a memorandum to all Certified Professional Employer Organizations (CPEOs) that clarifies their liability for ERTC claims. According to the memorandum, CPEOs are solely liable for employment tax liabilities related to the wages paid to worksite employees of their CPEO customers. This means that CPEOs must exercise caution when evaluating a customer's eligibility for ERTC claims.

The memorandum also addressed non-certified PEOs (third-party payors) and stated that the IRS is sending notices to employers, including TPPs, whose ERC claims appear to exceed legally allowable amounts. In such cases, both the TPP and the common law employer client may be held liable for employment tax liabilities.

The IRS is also working on a program that allows employers to voluntarily reclaim incorrectly claimed ERTC amounts.

IRS Offers CPEOs the Ability to Resubmit ERTC Claims:

In another development, the IRS is reaching out to CPEOs to offer them the opportunity to resubmit consolidated amended returns containing ERTC claims submitted before a moratorium issued in September. This move aims to expedite the processing of legitimate claims made by CPEOs.

However, it's important to note that only CPEOs are eligible for this program, and it is limited to claims filed before the moratorium that are still "in process." While the deadline for submission is not strict, businesses should consider acting promptly to benefit from this opportunity.

IRS Announces Rejection of 20,000 ERTC Claims:

The IRS has announced the rejection of 20,000 ERTC claims in its initial set of "disallowance" letters. These letters are being sent to entities deemed ineligible for the ERTC, primarily because they did not exist or did not have paid employees during the eligible period. Additionally, the IRS plans to introduce a voluntary disclosure program for taxpayers who received an ERTC they now believe they were not entitled to.

Backlog of ERTC Claims Crosses One Million Threshold:

One concerning development is the backlog of unprocessed 941-X forms, which has now crossed the one million mark as of December 6. This backlog has increased significantly since the moratorium went into effect in September.

NAPEO issued a press release on December 4, highlighting the urgency of processing legitimate ERTC claims, especially those that have been stuck inside the IRS for extended periods. As NAPEO continues to advocate for prompt action by Congress and the IRS, it's essential for businesses to stay vigilant and proactive in their ERTC-related matters.

Conclusion:

Staying informed about the latest IRS updates and guidance on the Employee Retention Tax Credit is crucial for businesses aiming to navigate the complex tax landscape effectively. We will continue to monitor these developments closely and provide you with timely updates. 

At Notice Ninja, we understand the challenges businesses face in keeping up with ever-changing tax and compliance regulations. That's why we're here to help. With our digital notice compliance platform, NOTICENINJA, companies can stay ahead of tax and compliance notices effortlessly. Our platform is designed to streamline the process of tracking, managing, and responding to notices, ensuring that you remain in compliance and avoid costly penalties.

Rest assured that Notice Ninja is your trusted partner in maintaining compliance and staying on top of critical tax updates. Stay tuned for more updates and insights to help you make informed decisions and achieve peace of mind in your compliance efforts.