House Passes Bill Aimed at Preventing and Combating Employee Retention Credit (ERC) Fraud in 2024

The U.S. House of Representatives has passed a bill aimed at preventing and combating fraud under the pandemic-era Employee Retention Credit (ERC) program. If passed, the bill would extend the statute of limitations for imposing ERC-related assessments while increasing the penalties for promoters of fraudulent ERC filing schemes.

As Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, the bill (known as the Tax Relief for American Families and Workers Act of 2024) would also formally end the ERC program. While the Internal Revenue Service (IRS) placed a moratorium on processing new claims last September, the program does not formally end until April 15, 2025 (although the final date to file claims for the 2020 tax year is April 15, 2024).

Key Provisions of the Tax Relief for American Families and Workers Act of 2024

Here are the key provisions of the Tax Relief for American Families and Workers Act of 2024 that relate to the ERC program and the federal government’s ongoing efforts to combat ERC fraud:

• The End of the ERC Program – If enacted, the Tax Relief for American Families and Workers Act of 2024 would close the ERC program effective January 31, 2024. With the IRS’s moratorium, this means that the last date for submitting an ERC claim for processing would have been September 13, 2023.
• Increased Statute of Limitations – The Tax Relief for American Families and Workers Act of 2024 seeks to increase the statute of limitations for ERC-related assessments from five years to six. For most businesses, the six-year limitations period would run from the date that they received their credit or refund.
• Increased Penalties for Promoters – The bill also seeks to increase the penalties for promoters found guilty of aiding and abetting the submission of fraudulent ERC claims. Promoters could face fines of up to $200,000 ($10,000 for individuals) or 75 percent of their revenue from aiding and abetting, whichever is greater, with these penalties being retroactive to March 12, 2020.

Regardless of whether the Tax Relief for American Families and Workers Act of 2024 becomes law (though it most likely will), business owners and promoters must carefully assess their ERC-related risk in 2024. The IRS is aggressively targeting ERC fraud, and while the IRS has opened multiple options for proactively resolving ERC-related tax controversies, each of these options presents its own unique set of risks. However, as the risks of facing an IRS audit or criminal investigation can be even greater, a proactive approach will be best in most cases. In all cases, the key is to make informed decisions with the help of experienced legal counsel.

Schedule an Appointment with Virginia Tax Lawyer Kevin E. Thorn

If you need to know more about the options for proactively resolving ERC-related tax controversies (or if you are facing scrutiny from the IRS), we encourage you to contact us promptly. To schedule an appointment with Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or contact us confidentially online today.