Tax Relief for American Families and Workers Act of 2024 Seeks to Close Employee Retention Credit (ERC) Program While Increasing Risks of ERC Fraud

A law pending before Congress would close the Employee Retention Credit (ERC) program early while also increasing the risks for businesses and promoters accused of ERC fraud. The Tax Relief for American Families and Workers Act of 2024 passed the House on January 31 by a vote of 357-70 and is expected to receive similar support in the Senate. Here, New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what business owners and promoters need to know.

5 Key Facts About the Tax Relief for American Families and Workers Act of 2024

The Tax Relief for American Families and Workers Act of 2024 includes several provisions that are poised to assist in the federal government’s ongoing fight against ERC fraud. If passed, the law will:

1. End the ERC Program Effective January 31, 2024

While the Internal Revenue Service (IRS) stopped processing new ERC claims on September 14, 2024, under an indefinite moratorium, the Tax Relief for American Families and Workers Act of 2024 would formally close the ERC program effective January 31, 2024. Currently, if the IRS were to lift its moratorium, the final date to file claims for 2020 would be April 15, 2024, and the final date to file claims for 2021 would be April 15, 2025.

2. Increase the Statute of Limitations for ERC-Related Assessments

If enacted, the Tax Relief for American Families and Workers Act of 2024 will increase the statute of limitations for the IRS to impose ERC-related assessments from five years to six years. For most businesses, this limitations period would run from the date that the business received its ERC credit or refund.

3. Increase the Penalties for Promoters of Fraudulent ERC Filing Schemes

Through the Tax Relief for American Families and Workers Act of 2024, Congress is seeking to increase the penalties for promoters found guilty of aiding and abetting fraudulent ERC filing schemes. Under the proposed law, promoters could face a fine of up to $200,000 ($10,000 for individuals) or 75 percent of the revenue generated from promoting fraudulent ERC filing schemes, whichever is greater.

4. Impose the New Enhanced Promoter Penalties Retroactively

In addition to increasing the penalties for aiding and abetting ERC fraud, the Tax Relief for American Families and Workers Act of 2024 would also impose these penalties retroactively. Under the statute, promoters could face these penalties for violations dating back to March 12, 2020.

5. Increase the Importance of Resolving ERC-Related Tax Controversies Proactively

In light of these pending developments, it is more important now than ever for ERC claimants and promoters to resolve their ERC-related tax controversies proactively. The IRS is actively targeting ERC fraud in 2024, and if enacted, the Tax Relief for American Families and Workers Act of 2024 will further empower the IRS to hold businesses, business owners, and promoters accountable.

Schedule a Confidential Consultation with New Jersey Tax Attorney Kevin E. Thorn

If you need to know more about the options for resolving ERC-related tax controversies with the IRS, we encourage you to contact us promptly. Please call 201-842-7696 or send us a message online to request an appointment with New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.