The IRS announced that it will open a new, supplemental claim process to help third-party payers, such as employee leasing companies, and their clients resolve incorrect claims for the employee retention credit (ERC) (IR-2024-246).

According to the IRS, third-party payers handle clients' payroll and tax reporting duties and report and pay clients' federal employment taxes under the third-party payer's employer identification number (EIN). They include certified professional employer organizations (CPEOs), professional employer organizations (PEOs), and Sec. 3504 agents.

Some of these payers filed ERC claims for multiple employers. When a third-party payer's client determines that it is ineligible for the ERC and wants to resolve their claim, the IRS says it is the third-party payer's responsibility to correct it.

The supplemental claim process lets a third-party payer that filed a prior claim with multiple clients withdraw only the claims of some clients while maintaining the claims of the qualifying clients.

"The supplemental claim program is a critical step to improve the IRS's ability to process employee retention credit claims for this more complex segment of taxpayers," IRS Commissioner Danny Werfel said in a news release. "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."

Supplemental claims process

The supplemental claims process is available for third-party payers that filed one or more claims aggregating ERCs for itself and/or clients using the third-party payer's EIN and that made the claim on an adjusted employment tax return. Furthermore, the IRS must not have processed any of the ERC claims included in the supplemental claim.

A third-party payer must prepare one supplemental claim for each tax period filed on or before Jan. 31, 2024. The supplemental claim should not include ERC amounts that were filed after Jan. 31, 2024. Each claim must include the correct amount of ERC and any other corrections for that tax period.

The amount of ERC 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 supplemental claim.

Supplemental claims must be submitted by 11:59 p.m. on Nov. 22, 2024.

The IRS has more information available about filing a supplemental claim, including frequently asked questions, on its website.

The supplemental claim becomes the sole adjusted employment tax return for the tax period. The IRS said it will review completed supplemental claims and determine if the claim will be accepted, disallowed, or partially allowed, or if the claim requires additional review.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.