The Internal Revenue Service is opening a supplemental claim process to help third-party payers and their clients resolve incorrect Employee Retention Credit claims.
Third-party payers report and pay clients' federal employment taxes under the third-party payer's EIN. Some of these payers filed ERC claims for multiple employers. If these clients have since determined that they're ineligible for the ERC and want to resolve their claim, it's the third-party payer that needs to correct it.
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"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," said IRS Commissioner Danny Werfel, in a statement.
A supplemental claim is an adjusted employment tax return that allows a third-party payer to correct and/or consolidate previous claims that they filed on or before Jan. 31, 2024, if those claims have not yet been processed by the IRS.
By filing a supplemental claim, the third-party payer is asking the IRS not to process outstanding adjusted employment returns for the tax period.
The supplemental claim process is for third-party payers about which all the following apply:
- The payer has filed one or more claims aggregating ERCs for itself or clients using the payer's EIN.
- The payer made the claim on an adjusted employment tax return (Forms 941-X, 943-X, 944-X or CT-1X).
- The IRS has not processed any of the claims the third-party payer has included in the supplemental claim.
This process is not for:
- Common law employers who did not use a third-party payer and instead filed adjusted employment tax returns using their own EIN.
- Third-party payers that received the full amount of ERC claimed on behalf of themselves and their clients — either as a refund or a credit against tax owed.
A payer 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 third-party payer should use the adjusted employment tax return for their type of business to prepare the supplemental claim.
The payer should not include ERC amounts that were filed after Jan. 31, 2024. The amount of ERC on the supplemental claim must be equal to or less than the ERC claimed on the returns the third-party payer is replacing with the supplemental claim.
Third-party payers have until 11:59 p.m.,
