The IRS recently finalized regulations (T.D. 9978) for recapturing erroneous refunds for COVID-19 employment credits with only minor modifications to the temporary and proposed versions released in July 2020.
The regulations apply to refunds of the paid sick and family leave credits under the Families First Act and the employee retention credit (ERC) under the CARES Act (these credits were further modified by several subsequent acts of Congress). Under the final regulations, any erroneous refunds of these “COVID-19 credits” are treated as underpayments of the applicable employment taxes and subject to specified assessment and administrative collection procedures.
The preamble to the final regulations explains that the assessment and administrative collection procedures may apply both in the processing of employment tax returns and in examining returns for excess claimed credits. In addition, these procedures are not intended to be exclusive and do not replace the existing recapture methods, but rather represent an alternative method available to the IRS.
The final regulations would also apply to any third-party payors of employment taxes on behalf of an employer, such as designated agents and professional employer organizations (PEOs). The final regulations are effective on July 24, 2023 and supersede the prior proposed and temporary regulations.
The IRS has made enforcement of employee retention credit claims a major compliance focus and IRS Commissioner Danny Werfel recently told Congress that the IRS would support legislation providing an end date for filing claims and giving it more oversight of paid preparers.
Contact:
Jeff Martin
Partner, Washington National Tax Office
Washington, D.C.
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.