Proposed Law Would End the Employee Retention Credit (ERC) and Increase the Risks for Businesses and Promoters Targeted for ERC Fraud

With the Internal Revenue Service (IRS) continuing to target fraud under the Employee Retention Credit (ERC) program, Congress has now proposed a law that would bring the program to an end. The proposed law would also lengthen the statute of limitations for ERC fraud enforcement and enhance the penalties for promoting fraudulent ERC filing schemes. Learn more from Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

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

While the Tax Relief for American Families and Workers Act of 2024 is an omnibus piece of federal tax legislation, one of its key features is a clause that proposes to permanently end the ERC. As written, the law would close the ERC effective January 31, 2024. With the IRS’ moratorium on ERC claims in effect since September 14, 2023, this would mean that the last date to file an ERC claim and receive a refund was September 13, 2023.

Statute of Limitations for ERC-Related Assessments Would Increase to Six Years

The Tax Relief for American Families and Workers Act of 2024 would also increase the statute of limitations for ERC-related assessments to six years. This six-year limitations period would run from the latest of (i) the date of filing, (ii) the date on which a taxpayer’s filing is treated as filed under 26 U.S.C. Section 6501(b)(2), or (iii) the date on which “the claim for credit or refund with respect to such credit is made.”

Promoters of Fraudulent ERC Filing Schemes Would Face Enhanced Penalties

Along with ending the ERC and lengthening the statute of limitations for ERC-related assessments, the Tax Relief for American Families and Workers Act of 2024 would also significantly enhance the penalties for promoters targeted by the IRS and other federal authorities. If charged with aiding and abetting tax fraud under 26 U.S.C. Section 6701(b), promoters could face fines equal to the greater of: (i) $200,000 ($10,000 for individuals), or (ii) 75 percent of the promoter’s income generated from assisting with fraudulent ERC filings. These penalties would be retroactive for violations dating back to March 12, 2020.

Avoiding IRS Scrutiny and Resolving ERC-Related Audits and Investigations

While the Tax Relief for American Families and Workers Act of 2024 is yet to become law, business owners and promoters targeted for ERC fraud still face substantial risks—including the risk of criminal prosecution in many cases. The IRS has opened multiple pathways for taxpayers to resolve ERC-related issues without facing criminal liability, and pursuing one of these pathways will be the best approach in many (but not all) cases. For taxpayers who have concerns about facing scrutiny, an informed approach is critical, and it is best to seek legal counsel promptly.

Request a Confidential Consultation with Washington D.C. Tax Attorney Kevin E. Thorn

If you need to know more about mitigating the risk of facing ERC-related scrutiny from the IRS, we encourage you to get in touch. To request a confidential consultation with Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 202-349-4033 or contact us online today.