On Sept. 26, the IRS said it is opening a supplemental claim process to assist third-party payers and their clients in resolving incorrect Employee Retention Credit (ERC) claims.
In the agency’s release on the process, IRS Commissioner Danny Werfel said, “As we continue to accelerate and intensify our work in this area to help qualifying small businesses and protect against improper claims, we continue to explore and develop additional ways to speed our work on this incredibly detailed credit where the number of claims exploded following aggressive marketing.”
Third-party payers (TPPs) report and pay their clients’ federal employment taxes under the third-party payer’s Employer Identification Number. They also handle clients’ payroll and tax reporting duties.
Some of these TPPs filed ERC claims for multiple employers. If a TPP’s client has since determined ineligibility for the ERC and wants to resolve the claim, the TPP needs to correct it.
This supplemental claim process lets a TPP that filed a prior claim with multiple clients “withdraw” only some clients while maintaining the claims of those that qualify.
According to the IRS release, a supplemental claim is an adjusted employment tax return allowing a third-party payer to correct and/or consolidate previous claims filed on or before Jan. 31, 2024, if the IRS still needs to process those claims.
By filing a supplemental claim, the third-party payer asks the IRS not to process outstanding adjusted employment tax returns for the tax period. The IRS will treat claims filed before the supplemental claim as never filed and review the supplemental claims instead of adjusted employment tax returns filed on or before Jan. 31, 2024.
A TPP must prepare one supplemental claim for each tax period filed on or before Jan. 31, 2024. Each claim must include the correct amount of ERC and any other corrections for that tax period.
The TPP should also prepare the supplemental claim using the adjusted employment tax return for their type of business, with forms 941-X, 943-X, 944-X or CT-1X.
The TPP should not include ERC amounts filed after Jan. 31, 2024. The ERC amount on the supplemental claim must be equal to or less than the cumulative amount of ERC claimed on the returns the third-party payer is replacing by filing the supplement claim.
Third-party payers can submit a supplemental claim using a computer or mobile device to fax the documents by 11:59 p.m. on Nov. 22.
Once the supplemental claim is complete, as determined by the IRS, the agency will review it to determine whether it will be accepted as filed, partially allowed, or disallowed, or if it needs additional review or examination. The supplemental claim becomes the sole adjusted employment tax return for the tax period.