Enforcement Provisions with Respect to Covid-Related Employee Retention Credits
Section 70605 · Sec. 70605 ·
What this chapter is about
This part cracks down on promoters of a COVID era payroll credit. A promoter who skips due diligence pays $1,000 for each lapse. No claim filed after January 31, 2024 may be paid. The government gets six years to assess.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70605 in the PDF
What the document says
“Any COVID-ERTC promoter which provides aid, assistance, or advice with respect to any COVID-ERTC document and which fails to comply with due diligence requirements imposed by the Secretary with respect to determining eligibility for, or the amount of, any credit or advance payment of a credit under section 3134 of the Internal Revenue Code of 1986, shall pay a penalty of $1,000 for each such failure.”
The section requires a COVID-ERTC promoter helping with a COVID-ERTC document that fails the Secretary's due diligence requirements on eligibility for or the amount of a credit under section 3134 of the Internal Revenue Code of 1986 to pay $1,000 for each failure. Those requirements are to be similar to those under section 6695(g), the penalty reaches only documents that are or relate to a return or claim for refund, and it is treated as imposed under section 6695(g) and assessed under section 6201.
What the document actually says
“Any COVID-ERTC promoter which provides aid, assistance, or advice with respect to any COVID-ERTC document and which fails to comply with due diligence requirements imposed by the Secretary with respect to determining eligibility for, or the amount of, any credit or advance payment of a credit under section 3134 of the Internal Revenue Code of 1986, shall pay a penalty of $1,000 for each such failure.”
That sentence, in plain words
A promoter who helps with such a paper must take due care. Falling short costs $1,000 each time.
What this is about
Due care means checking that the claim holds up. The Secretary sets what that means. The fine bites only on returns and refund claims.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“any person which provides aid, assistance, or advice with respect to such document if--”
The section defines a COVID-ERTC promoter as a person helping with such a document who charges a fee based on the size of the refund or credit and whose receipts from that work in the year or the year before top 20 percent of total receipts, or whose receipts from that work top 50 percent of total receipts, or top 20 percent of total receipts and also exceed $500,000 after applying an aggregation rule. A certified professional employer organization as defined in section 7705 is not a promoter. A COVID-ERTC document is any return, affidavit, claim or other document tied to such a credit, including anything on eligibility or the amount.
What the document actually says
“any person which provides aid, assistance, or advice with respect to such document if--”
That sentence, in plain words
The term covers a person who helps with such a paper. The tests that follow narrow it.
What this is about
One test is a fee based on the refund won. The others turn on how much of the firm's income comes from this work. Certain staffing firms are left out.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70605 in the PDF
What the document says
“no credit under section 3134 of the Internal Revenue Code of 1986 shall be allowed, and no refund with respect to any such credit shall be made, after the date of the enactment of this Act, unless a claim for such credit or refund was filed by the taxpayer on or before January 31, 2024.”
The section bars, notwithstanding section 6511 of the Internal Revenue Code of 1986, any credit or refund under section 3134 after enactment unless the claim was filed on or before January 31, 2024. That change applies to credits and refunds allowed or made after enactment.
What the document actually says
“no credit under section 3134 of the Internal Revenue Code of 1986 shall be allowed, and no refund with respect to any such credit shall be made, after the date of the enactment of this Act, unless a claim for such credit or refund was filed by the taxpayer on or before January 31, 2024.”
That sentence, in plain words
No credit is given and no refund is paid after this law. That is unless the claim went in by January 31, 2024.
What this is about
The normal time limit is set aside. A claim filed after that date is dead. The date is fixed in the law.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall not”Who acts: Secretary of the TreasuryHow: statuteSec. 70605 in the PDF
What the document says
“the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 6 years after the latest of--”
The section rewrites section 3134(l) of the Internal Revenue Code of 1986 so that, notwithstanding section 6501, the time to assess an amount tied to a credit claimed under that section does not run out before six years after the latest of the filing of the original return covering the quarter, the date the return is treated as filed under section 6501(b)(2), and the date the claim for credit or refund is made. Where an assessment follows, the time to claim a refund for a deduction on improperly claimed wages runs at least as long. That change applies to assessments made after enactment.
What the document actually says
“the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 6 years after the latest of--”
That sentence, in plain words
The clock for assessing these credits runs longer. It does not run out before six years. It starts from the latest of the dates below.
What this is about
One is when the original return was filed. One is when it counts as filed. One is when the claim was made.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“Section 6676(a) is amended by striking "income tax" and inserting "income or employment tax".”
The section strikes income tax and inserts income or employment tax in section 6676(a) of the Internal Revenue Code of 1986, so that the penalty for an erroneous claim reaches employment tax as well. That change applies to claims for credit or refund after enactment, and the rest of the section applies to aid, assistance and advice provided after enactment. The Secretary must issue guidance to carry the section out.
What the document actually says
“Section 6676(a) is amended by striking "income tax" and inserting "income or employment tax".”
That sentence, in plain words
Two words are taken out of a penalty rule. Wider words are put in. They add employment tax.
What this is about
The penalty used to reach income tax only. Now it reaches payroll tax too. That is the tax these credits sat against.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the section does: impose the due diligence penalty, define a COVID-ERTC promoter and a COVID-ERTC document, bar credits and refunds on late claims, extend the assessment period to six years with the matching deduction rule, widen the erroneous claim penalty to employment tax, fix the effective dates, and require guidance.
The aggregation rule for gross receipts and the exception for a certified professional employer organization, which are carried in summaries.
The section works alongside sections 3134, 6201, 6501, 6511, 6676, 6695 and 7705 of the Internal Revenue Code of 1986, none of which is indexed here, so what the employee retention credit gives cannot be checked against anything on this site.
