The IRS recently issued proposed and temporary regulations (TD 9953) on how the IRS can assess and collect erroneous refund amounts of the payroll tax credits enacted in the American Rescue Plan Act of 2021 (ARP).
The ARP added new Sections 3131, 3132, and 3134, to allow eligible employers to claim payroll tax credits for qualified paid sick and family leave and qualified wages (under the employee retention credit provisions) for certain periods in 2021 if specific requirements are satisfied.
These 2021 payroll tax credits are similar to the payroll tax credits initially added in 2020 as part of the Families First Coronavirus Response Act (Families First Act), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and subsequent legislation.
Excess payroll tax credits claimed by employers generally are treated as erroneous refunds that the employers must repay. The new proposed and temporary regulations (TD 9953) provide the authority for the IRS for administrative recapture of erroneous refunds.
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