The Employee Retention Credit (ERC) is a refundable tax credit that was created by the CARES Act in March 2020. It was designed to help businesses keep their employees on payroll during the COVID-19 pandemic. However, third-party payers who improperly claim the ERC on behalf of their clients may be held liable for any resulting tax deficiencies and penalties.
The IRS today publicly released a generic legal advice memorandum (GLAM)* that addresses the liability of third-party payers (TPPs) for underpayments of employment tax when the employee retention credit (ERC) is improperly claimed by a common law employer client on an employment tax return filed by the TPP under its own employer identification number (EIN).
The GLAM concludes that the following categories of TPPs are liable for any underpayments resulting from any improperly claimed employment tax credit (including the ERC) that the TPP claims for a client on the TPP’s employment tax return filed under the TPP’s EIN based on wages paid by the TPP to the client’s employees:
Read GLAM 2024-001 [PDF 116 KB] (release date of February 16, 2024, and dated February 5, 2024)
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