The IRS has just introduced a new process that makes it easier for payroll companies and their clients to correct mistakes related to the Employee Retention Credit (ERC). If you’re a business owner who used a payroll service, this update could be a game-changer for resolving any incorrect claims. Here’s what you need to know!
What’s the New Process?
The IRS’s supplemental claim process is designed specifically for third-party payers (TPPs) who handle payroll and tax reporting for multiple businesses. If a TPP discovers that one of their clients is ineligible for the ERC, they can now withdraw that specific claim without affecting the claims for other eligible clients. This new flexibility aims to help businesses navigate the complexities of tax compliance more easily.
IRS Commissioner Danny Werfel emphasized that this program is crucial for improving how the IRS processes ERC claims, especially given the surge in claims recently. The goal is to help small businesses while ensuring that incorrect claims don’t burden the system.
Who Can Benefit from This Process?
This supplemental claim process is intended for TPPs that meet the following criteria:
Filed Claims: They have submitted claims for Employee Retention Credits using their own Employer Identification Number (EIN).
Adjusted Returns: These claims were made on specific tax forms (like Forms 941-X, 943-X, 944-X, or CT-1X).
Pending Claims: The IRS has not yet processed the claims that the TPP wants to adjust.
However, if you are a business owner who filed your own claims without a TPP, this specific process won’t apply to you. But don’t worry—other options are available for addressing your claims.
How to Submit a Supplemental Claim
If you’re a payroll company looking to file a supplemental claim, here’s a simple step-by-step guide:
Prepare Your Claims: You need to create a separate supplemental claim for each tax period you filed before January 31, 2024. Make sure to include the correct amounts and any necessary corrections.
Use the Right Forms: Depending on your type of business, use the appropriate adjusted employment tax return form (Forms 941-X, 943-X, 944-X, or CT-1X).
Avoid Duplicates: Do not include ERC amounts from claims filed after January 31, 2024. Ensure that the amount you list is equal to or less than what was previously claimed.
Submit by Deadline: You’ll need to fax your claims by 11:59 p.m. on November 22, 2024.
What Happens After You Submit?
After you send in a supplemental claim, the IRS will review it to ensure everything is in order. If everything looks good, they will decide whether to accept it, partially allow it, or if it requires further examination. Importantly, this supplemental claim will replace any previously filed claims for that tax period, streamlining the process for everyone involved.
Final Thoughts
The IRS’s new supplemental claim process is a positive step towards making tax compliance easier for payroll companies and their clients. If you’ve encountered issues with your Employee Retention Credit claims, this process offers a clearer path to resolution.
Stay informed and proactive about these changes. If you’re unsure how to proceed, consider reaching out to your payroll provider for guidance. They can help navigate the details and ensure you’re making the most of this new opportunity! For more information, you can check out the IRS guidelines on filing a supplemental claim and the FAQ section for third-party payers.
By understanding this new process, you’ll be better equipped to handle your business’s tax obligations and ensure that you’re taking advantage of available credits.
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