Employers considering filing employee retention credit (“ERC”) claims with the IRS should be aware that a new congressional tax proposal, called the Tax Relief for American Families and Workers Act of 2024, advocates moving the filing deadline for ERC claims up to January 31, 2024. Currently, the ERC filing deadlines are April 15, 2024, for 2020 tax periods and April 15, 2025, for 2021 tax periods. This congressional tax proposal, if passed, will massively advance those deadlines and terminate the ERC program as of January 31, 2024. The deadline for Congress to pass the tax proposal has been extended until March 2024, but if the proposal is passed, the ERC filing deadline of January 31, 2024, may be applied retroactively. This tax proposal stems from a significant amount of abuse and fraud surrounding the ERC program.
Eligible employers should consider filing their ERC claim before January 31, 2024, in order to obtain the tax credits. Employers who are still working to determine if they are eligible may also consider filing a protective claim with the IRS in order to preserve their eligibility beyond the termination of the program.
A protective claim is a judicially created protection for taxpayers that tolls the statute of limitations for a claim until the taxpayer actually can file its claim. An employer may only utilize a protective claim if their eligibility is contingent on a future event that is not determinable until after the statute of limitations expires. A protective claim requires employers to provide notice to the IRS of its ERC claim and must describe the legal and factual basis on which it relies. An employer that files a protective claim prior to January 31, 2024, may be permitted additional time to determine its eligibility for an ERC claim.
Employers should seek advice from their trusted legal counsel or tax professionals to determine if they should file an ERC claim or a protective claim prior to the potential January 31, 2024, deadline.
Liebert Cassidy Whitmore attorneys are closely monitoring developments in relation to this Special Bulletin and are able to advise on the impact this could have on your organization. If you have any questions about this issue, please contact our Los Angeles, San Francisco, Fresno, San Diego, or Sacramento office.