This summer, the PayrollOrg Government Relations Division attended a hearing held by the U.S. House of Representatives Ways and Means Committee Oversight Subcommittee: The Employee Retention Tax Credit Experience: Confusion, Delays, and Fraud. The hearing addressed issues related to the employee retention credit (ERC), including how to prevent similar problems with any future relief measures, what to do to help employers that made mistakes, and how to prevent criminal activity.
The ERC is a tax credit enacted to help businesses during the COVID-19 pandemic. The ERC was amended three times by Congress with immediate effective dates. The period of eligibility for the ERC for affected businesses was very limited.
The House Oversight Subcommittee was initially made aware of the problems through the IRS before the hearing. IRS Commissioner Danny Werfel, who spoke at the summer IRS Tax Forums, said many businesses legitimately applied for the ERC, but aggressive marketing overshadowed the program.
Details From the Hearing
Oversight Subcommittee Chair David Schweikert (R-Ariz.) said the ERC is a complicated process and that the IRS has not offered sufficient guidance or responded to employers on the status of their ERC claims. He also said the Form 941-X that is needed to make a claim can only be filed on paper, which slows the processing time.
Third-party ERC mills have created an unfair playing field by suggesting that employers are eligible for relief. When employers seek information from payroll professionals and tax practitioners and are told that they are not eligible, they may go to an ERC mill and file a claim that they are ineligible to receive.
Witnesses and congressional leaders did not offer any solutions during the hearing. However, the hearing may serve to pressure the IRS to continue to improve its electronic capabilities, something PayrollOrg is also advocating for.
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Adam Prinzo is the Assistant Manager of Government Relations at PayrollOrg.
