To increase the penalties applicable to persons facilitate fraud with respect to any COVID-related employee retention credit, and for other purposes.
10/7/2024, 12:18 PMSummary of Bill HR 9738
Bill 118 hr 9738 aims to increase the penalties for individuals who commit fraud related to the COVID-19 employee retention credit. This credit was established to help businesses retain employees during the pandemic, but some individuals have been taking advantage of the system by committing fraud.The bill seeks to deter this fraudulent behavior by increasing the penalties for those who facilitate fraud with respect to the employee retention credit. By imposing stricter penalties, the hope is that individuals will think twice before engaging in fraudulent activities related to this credit.
In addition to increasing penalties, the bill also includes provisions for other purposes related to combating fraud in relation to the employee retention credit. This could include measures to improve oversight and enforcement of the credit, as well as additional resources for investigating and prosecuting cases of fraud. Overall, Bill 118 hr 9738 is aimed at protecting the integrity of the COVID-19 employee retention credit and ensuring that it is used as intended to help businesses retain employees during these challenging times.
Congressional Summary of HR 9738
This bill increases the penalty for aiding and abetting the understatement of tax liability with respect to the employee retention tax credit (ERTC) by a COVID-ERTC promoter, extends the time period for assessing and collecting tax attributable to the understatement, and disallows the ERTC after January 31, 2024.
Under the bill, a COVID-ERTC promoter may be liable for the greater of $200,000 ($10,000 for a natural person), or 75% of the amount derived from the aid, advice, or assistance related to a COVID-ERTC document that understates a taxpayer’s tax liability. Under current law, the penalty for knowingly aiding and abetting in the understatement of tax liability is $1,000 for an individual return or $10,000 for a corporate return.
The bill defines a COVID-ERTC promoter as any individual, trust, estate, partnership, association, company, or corporation that provides aid, assistance, or advice related to a COVID-ERTC document for a contingency fee and with gross receipts derived from providing aid, assistance, or advice related to a COVID-ERTC document exceeding a specified threshold.
A COVID-ERTC document is any return, affidavit, claim, or other document associated with a ERTC claim related to COVID.
The bill extends the time period for assessing and collecting any tax liability associated with an understatement of tax liability related to the ERTC from five to six years.
Finally, under this bill, claims for the ERTC related to COVID must be filed on or before January 31, 2024.
