global Tax Penalty Relief Available for Employers Claiming the Employee Retention Credit April 26, 2022 Attention businesses…do you owe penalties for additional income taxes assessed as a result of filing a retroactive ERC claim? Here’s what you should know. Important reminder for taxpayers who retroactively claimed Employee Retention Credits (ERC)..penalty relief is available! Read on. What is the ERC? The Employee Retention Credit (ERC) was created under the CARES Act to provide financial relief to employers who kept workers on the payroll during the COVID-19 pandemic. Subsequent legislation expanded and extended the ERC through the quarter ended September 30,2021 for most eligible businesses. Retroactive ERC claims It is important to note that employers can still retroactively claim the ERC for qualified wages paid prior to September 30, 2021. The IRS requires those who retroactively claim the ERC to file an amended income tax return if they previously filed their tax return and if unfiled as of yet, claim the credit amount, indicating their reduced wage deduction which in turn, raises their income tax liability. Many impacted taxpayers, however, have not received their ERC payment (due to the IRS’ backlog) so they are unable to pay their increased income tax. What is the penalty relief? If you can show reasonable cause (and not willful neglect) for your failure to pay, you may be eligible for penalty relief. Additionally, under the IRS’ first time penalty abatement program, you may qualify for administrative relief for failure to pay penalties. You must meet these requirements: Did not previously have to file a returnHad no penalties for the last three tax yearsFiled all currently required returns or filed an extension of time to filePaid or arranged to pay any taxes due Need help assessing your individual situation? We can help.