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The Internal Revenue Service (IRS) has announced a new supplemental claim process designed to assist third-party payers (TPPs) and their clients in resolving incorrect claims for the Employee Retention Credit (ERC). This new process allows third-party payers, who file and pay federal employment taxes on behalf of their clients, to withdraw ineligible claims while maintaining those for qualifying clients.
Danny Werfel, IRS Commissioner, emphasized the significance of this new process: “The supplemental claim program is a critical step to improve the IRS’s ability to process Employee Retention Credit claims for this more complex segment of taxpayers. As we continue to accelerate and intensify our work in this area to help qualifying small businesses and protect against improper claims, we continue to explore and develop additional ways to speed our work on this incredibly detailed credit where the number of claims exploded following aggressive marketing.”
About the Supplemental Claim Process
A supplemental claim allows third-party payers to correct and consolidate previous ERC claims that were filed on or before January 31, 2024, but have not yet been processed by the IRS. This process lets a TPP request that the IRS disregard certain claims while retaining others, effectively treating the outstanding claims as if they were never filed.
The process applies to third-party payers that meet the following conditions:
- Filed one or more aggregated ERC claims for themselves and/or clients using their Employer Identification Number (EIN).
- Submitted claims on an adjusted employment tax return, such as Forms 941-X, 943-X, 944-X, or CT-1X.
- The IRS has not yet processed any of the claims included in the supplemental submission.
This process is not available for:
- Common law employers who did not use a third-party payer and filed their own adjusted employment tax returns.
- Third-party payers that have already received the full ERC amount claimed, either as a refund or a credit.
Filing a Supplemental Claim
To file a supplemental claim, third-party payers must submit an adjusted employment tax return for each tax period on or before January 31, 2024. The supplemental claim must include the correct ERC amounts and any other adjustments for that tax period. The cumulative ERC amount on the supplemental claim cannot exceed the amount claimed in the original submission.
Third-party payers must submit their claims by 11:59 p.m., November 22, 2024. Claims can be submitted electronically using a computer or mobile device to fax the necessary documents.
What Happens Next
Once the IRS receives a supplemental claim, it will review the submission to ensure it contains all necessary information. After the review, the IRS will determine if the claim will be fully accepted, partially allowed/disallowed, or if further examination is required. The supplemental claim will replace any previously filed adjusted employment tax returns for the tax period in question.
For more information, visit the IRS website and review the guidance on filing a supplemental claim for the Employee Retention Credit and the FAQ section for third-party payers.
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