Here’s what small business owners need to know about new legislation that could end the Employee Retention Credit (ERC) program on January 31, 2024.
Update as of April 16, 2024
While we still await Senate review of the bill that could end ERC effective 1/31/24, we have passed the existing ERC program deadline for 2020 credits of April 15, 2024.
What does this mean?
This means that while Congress continues to review the bill, businesses can no longer file for 2020 ERC claims. Under the existing program guidelines, businesses can continue to file for 2021 ERC claims until April 15, 2025.
Is there a new ERC maximum filing amount?
Yes, under existing program guidelines, businesses may receive up to $21,000 per employee through 2021 ERC claims. The process to file for these claims has not changed.
What should I do now?
If you believe you may qualify for 2021 ERC, submit NEWITY’s brief ERC application by creating or logging into your NEWITY account. The NEWITY ERC team continues to be focused on eligibility evaluation and precise calculation of ERC claims.
Given the complexity of the credit calculations and the potential pending legislation, the NEWITY team encourages you to file as soon as possible.
Submit Your ERC Application Today
Update as of March 13, 2024
For more than a month, the bill that could end ERC on 1/31/24 has sat awaiting Senate review.
Why hasn’t the Senate voted on the bill yet?
While the Senate’s session schedule is pre-determined for 2024, the exact topics for discussion are not. This means any emergency bills can take precedent over other agenda items, like the recent legislation providing assistance for Ukraine and Israel. In addition to voting on legislation, the Senate nominates and appoints ambassadors and federal court judges for all 50 states.
What should I do now?
Given the delay in voting, we encourage you to file for ERC as soon as possible. The ERC program outlines a filing deadline of 4/15/24 for all 2020-related credits. This means that after 4/15/24, if not earlier, you will not be able to claim credits for wages paid to employees in 2020. These credits can total $5,000 per employee in 2020.
To start your ERC application, create or log into your NEWITY account and click Start Application on the ERC tile. Our team will be reviewing and accepting applications as close to April 15th as possible. Given the complexity of the credit calculations and filings, we encourage you to start as soon as possible.
We will continue to keep you appraised of any updates from the Senate or IRS on this legislation and rapidly approaching deadline.
Update as of February 1, 2024
Last night, the House passed the Tax Relief for American Families and Workers Act, which would effectively end the ERC program on January 31, 2024.
The legislation will now move to the Senate for consideration. The Senate is in session today, February 1st and tomorrow, February 2nd. If the Senate passes the bill, it would be sent to the President to sign into law or veto.
While there are alternative scenarios in which the Senate could amend the bill, which would send it back to the House for re-vote, the House expressed a clear view in-favor of the bill with 357 Yeas and only 70 Nays.
Since the bill is progressing past the contemplated January 31, 2024 ERC deadline, the outcome of newly filed ERC claims is uncertain. There may be a brief grace period to allow business owners to continue to file for ERC after the bill is signed into law or they may retroactively end ERC, voiding any claims filed after January 31st.
Regardless of the bill’s progress, we will continue to provide fast funding for ERC claims filed before the program deadline through our ERC Advance program.
Check back to stay appraised of major legislative updates. Or create a NEWITY account to receive updates directly in your inbox.
Update as of January 22, 2024
Congress recently introduced the Tax Relief for American Families and Workers Act, which aims to improve tax credits for families, promote economic growth, and alter tax rules for certain groups. Part of this legislation proposes ending the ERC program on January 31, 2024.
Why are they proposing ending ERC as part of this Act?
Current guidelines indicate businesses have until April 15, 2024 to file for ERC claims in 2020 and April 15, 2025 for ERC claims in 2021. By ending ERC on January 31, 2024, the funds that were allocated for in-process and new ERC claims could be used to fund other programs included in the new legislation. The legislation also suggests that ending the ERC program early will stop new fraudulent ERC claims from being submitted to the IRS.
The focus on fraudulent ERC claims has become a point of contention following the influx of ERC promoters who misled business owners and encouraged them to file for ERC when they did not meet program requirements. Further, some ERC promoters miscalculated the business owners’ refund amount, allowing businesses to file for amounts in excess of their eligibility.
Reviewing these ERC filings and determining fraudulent claims has become exceptionally challenging for the IRS. In September 2023, when the IRS announced the moratorium on processing new ERC claims, the IRS noted there were more than 600,000 ERC filings that they needed to process. Today, it is estimated that the IRS has more than 1,000,000 outstanding ERC claims that need to be reviewed and processed.
What should I do if I haven’t filed for ERC yet?
If you haven’t filed for ERC yet, but think you may be eligible, you should act immediately. Choose your ERC filing group wisely, ensuring they will confirm your eligibility with detailed review, perform calculations that meet program guidelines, and prepare your Form 941-Xs accurately.
If you’re unsure if your chosen ERC group is legitimate, you may find our articles outlining red flags in ERC processors and eligibility nuances to be helpful:
- Three Red Flags to Look Out for in ERC
- Not All ERC Processors are Created Equal
- Letter From Our CEOs
- Warning Signs for misleading Employee Retention Scams
At NEWITY, we’re still processing ERC applications, performing detailed eligibility reviews, and advancing on ERC claims for qualified businesses.
If you’d like us to help you file for ERC, get started by creating a free NEWITY account and submitting our brief ERC application.
What should I do if I already filed for ERC?
We don’t anticipate the proposed legislative changes will impact the issuance of already filed ERC claims, so there is no immediate action needed. If that changes, we will provide an update on this Insights blog.
The bottom line
We will continue to keep this post updated as new information becomes available. We invite you to check back or create a NEWITY account to receive updates like this one directly in your inbox.