Arizona Congressional District One Congressman David Schweikert introduced the Employee Retention Tax Credit Repeal Act Monday along with Congressmen Jared Golden, D-ME., Mike Kelly, R-Penn. and Glenn Grothman, R-Wisc. This bipartisan legislation would rollback the Covid era Employee Retention Tax Credit that allowed businesses who continued to pay their employees during the Covid-19 pandemic to receive tax credits.
However, while this initiative was well intentioned as a part of the CARES Act, the program has been fraught with fraud, according to the IRS. The tax credits only qualify when applied to payrolls between March 2020 through the end of 2021. It initially provided a tax credit of up to $5,000 per employee, but after multiple reforms, now provides a tax credit of up to $28,000 per employee.
However, the Act states that businesses are able to file for the credit until April 15, 2025 – and some ERTC promoters are taking advantage of this, encouraging businesses that do not qualify to apply, creating a large backlog of claims.
"The further we get from the pandemic, we believe the percentage of legitimate claims coming in is declining," said IRS Commissioner Danny Werfel told attendees at the 2023 IRS Nationwide Tax Forum in Atlanta. "Instead, we continue to see more and more questionable claims coming in following the onslaught of misleading marketing from promoters pushing businesses to apply. To address this, the IRS continues to intensify our compliance work in this area."
Furthermore, the Committee for a Responsible Federal Budget released an analysis earlier this year stating that this program may end up costing more than seven times the initial projected deficit and go to businesses that do not need it to retain employees.
