PEO Risk Management: ERC Claim Reviews

ERC Strategies for PEOs: Understand how long ERC claim liability extends.

Current proposed legislation would significantly extend the ERC claim assessment period from three years to six years from the date on which the relevant ERC claim was actually filed.

A recently proposed law, discussed below, was introduced shortly after the IRS commissioner “met with members of the Senate Finance Committee to ask for additional tools for enforcement efforts related to the credit.”  The commissioner also testified before the House Ways and Means Committee, emphasizing the need for legislative changes to assist the IRS in combating improper ERC claims and those
endorsing them.

The proposed legislation, called the Tax Relief for American Families and Workers Act of 2024 (H.R.7024), was approved by the House in January, 2024.  The act would significantly extend IRS’s ERC claim assessment period from three years to six years. The act specifies that the six-year clock commences from the date on which the relevant Form 941, “Employer’s Quarterly Federal Tax Return,” is actually filed, when the Form 941 is deemed to have been filed, or when the credit or refund regarding the ERC is made, whichever occurs latest.

Given the ultra-slow manner in which the IRS has processed ERC claims, which has been
exacerbated by the moratorium and enhanced review process, employers might be susceptible to IRS audits for many years under the act.