IRS Introduces New Process to Help Paying Companies and Third-Party Payers Process Employee Retention Credit Claims

The Internal Revenue Service (IRS) has announced a new filing process designed to assist third party payers (TPPs) and their clients in resolving incorrect Employee Retention Credit (ERC) claims. This new process allows third-party payers, who file and pay federal employment taxes on behalf of their clients, to withdraw ineligible claims while taking care of those of qualified clients.

Danny Werfel, IRS Commissioner, emphasized the importance of this new process: “The supplemental application process is an important step in improving the IRS’s ability to process Employee Retention Credit applications for this highly complex segment of taxpayers. As we continue to accelerate and strengthen our work in this area to help deserving small businesses and protect against unfair claims, we continue to explore and develop more ways to speed up our work in this incredibly detailed debt where the number of claims has exploded after aggressive marketing. “

Regarding the Additional Claim Process

The supplemental claim allows third-party payers to amend and consolidate previous ERC claims filed on or before January 31, 2024, but not yet processed by the IRS. This process allows the TPP to request that the IRS ignore certain claims while retaining others, effectively treating the remaining claims as if they had never been filed.

The process applies to third party payers who meet the following criteria:

• Filed one or more consolidated ERC claims for themselves and/or clients using their Employer Identification Number (EIN).
• Submitted claims on amended employment tax returns, such as forms 941-X, 943-X, 944-X, or CT-1X.
• The IRS has not processed any claims filed in the supplemental submissions.

This process not available for:

• Common law employers who did not use a third party payer and filed their own prepared employment tax returns.
• Third-party payers who have already received the full amount of the ERC claimed, either as a refund or credit.

Filing a Supplemental Claim

To file an additional claim, third-party payers must submit an adjusted employment tax return for each tax period on or before January 31, 2024. The supplementary claim must include the correct ERC amounts and any other changes for that tax period. The amount of ERC included in the supplementary claim cannot exceed the amount claimed in the original shipment.

Third party payers must submit their applications by 11:59 pm, November 22, 2024. Applications can be submitted electronically using a computer or cell phone to fax the required documents.

What Happens Next

If the IRS receives a supplemental claim, it will review the submission to make sure it contains all the required information. After review, the IRS will determine whether the claim will be fully accepted, partially allowed/disallowed, or if further evaluation is required. The supplementary claim will supersede any previously filed amended tax returns for the tax period in question.

For more information, visit the IRS website and review the guidance for filing an additional claim for the Employee Retention Credit and the FAQ section for third-party payers.