Proposed Changes to the Employee Retention Credit Filing Deadline: H.R. 7024 Would Sunset the ERC on January 31, 2024

Marielle C. MacMinn, David G. Shapiro

​Last week, the House Ways and Means Committee voted to advance the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) to the House floor. As drafted, H.R. 7024 would be funded entirely by limitations on the employee retention credit (ERC). Under the bill, no new ERC claims would be permitted after January 31, 2024, and all improper claims would be subject to longer potential enforcement periods and higher penalties. While it is not clear that H.R. 7024 will pass in its current form, this bill creates a real risk that no ERC claims filed after January 31 will be processed – even if a final tax bill is passed after January 31.


What You Need to Know:

  • Proposed legislation would accelerate the ERC deadline to January 31, 2024.
  • The legislation would extend the statute of limitations for assessments to 6 years.
  • Any failure of "COVID-ERTC promoters" to conduct the required due diligence on claims will be treated as having "knowledge" for purposes of assessing penalties.​

H.R. 7024 would significantly shorten the time to file ERC claims. Under current law, 2020 ERC claims are due by April 15, 2024, and 2021 ERC claims are due by April 15, 2025. Taxpayers who have been preparing to file claims and are confident their claims are valid may wish to accelerate their filings. However, they should be mindful not only of the increased enforcement efforts announced by the IRS (which we previously have discussed) but also of the new enforcement provisions of H.R. 7024.

First among these is a longer assessment period. H.R. 7024 would extend the statute of limitations for assessments to six years after the latest of (1) the original filing date, (2) the date on which such return is treated as filed under section 6501(b)(2), or (3) the date on which the claim for credit or refund was made.

In addition, H.R. 7024 would increase penalties on "COVID-ERTC promoters" under section 6701(a). The bill defines COVID-ERTC promoters to include those people who provide aid, assistance, or advice as to the filing of ERC claims where (1) fees are based on the amount of refund or credit, and the ERC work exceeds 20% of the gross receipts for the taxable year; (2)  where ERC work exceeds 50% of the gross receipts for such taxable year; or (3) ERC receipts exceed 20% of total gross receipts and the aggregate gross receipts with respect to all ERC work exceeds $500,000. Certified professional employer organizations are excluded from the definition of COVID-ERTC promoter in the bill. We believe the IRS will interpret this provision to include, among others, people and businesses that provided ERC calculations, regardless of whether they actually file the tax returns seeking credits or refunds. The penalty amount will be the greater of $200,000 ($10,000 in the case of a natural person), or 75% of the gross income derived by such promoter. In addition, any COVID-ERTC promoter who failed to comply with the due diligence requirements will be deemed to have "knowledge" for purposes of assessing penalties. Penalties will be akin to those under section 6695(g), but will amount to $1,000 for each such failure.

Although the bill is subject to negotiation and may not be officially signed into law by the specified date, taxpayers are now alerted to the potential accelerated deadline, as well as potentially increased penalties and enforcement periods relating to invalid ERC claims. If you have questions regarding the validity of your ERC claim, please reach out to the authors of this Alert or a member of the Saul Ewing tax team.

Marielle MacMinn Headshot
David G. Shapiro
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