Republican Congressman David Schweikert, working alongside Reps. Mike Kelly (R-PA), Glenn Grothman (R-WI), and Jared Golden (D-ME) introduced the Employee Retention Tax Credit Repeal Act on Tuesday. The bipartisan legislation is designed to streamline lower-risk returns from small businesses for more rapid processing by prohibiting the IRS from processing COVID-19 Employee Retention Tax Credit (ERTC) claims filed after January 31, 2024. The bill also drastically increases the penalties on businesses and individuals defrauding the government.

According to a press release from Schweikert’s office, the ERTC was initially created to enable “Main Street” businesses to keep furloughed staff employed during the COVID-19 pandemic. “However, legitimate returns from small businesses desperately needing support were crowded out by perverse promoters looking to take advantage of an emergency program, landing ERTC on the IRS’s ‘Dirty Dozen’ list in 2023.”

In a July statement, IRS Commissioner Danny Werfel warned that the law, as written, presented “more and more questionable claims,” noting that, “The further we get from the pandemic, we believe the percentage of legitimate claims coming in is declining.” The Congressman’s office noted that Werfel asked for Congress to help with this situation and to assist the U.S. Department of the Treasury to “address fraud and error.”

“The ERTC Repeal Act would enable the return to fiscal sanity and end a program riddled with fraud that could cost up to seven times more—up to $550 billion—than initially estimated if allowed to continue. By eliminating the ERTC program, this bill would save taxpayers an estimated $79 billion over ten years. “

Schweikert explained, “We’ve all heard from the number of small businesses in our district waiting for their claims to be processed. A 1.4 million return backlog still exists, and moving the deadline up, rather than waiting until April 2025, will enable the IRS to go after the bad actors seeking to take advantage of taxpayers while approving legitimate claims faster and delivering long-overdue refunds to small businesses. Congress would be perpetuating a moral hazard if this level of fraud were allowed to go unpunished. It’s past time fiscal responsibility prevails, and we act on behalf of future generations who will be shouldered with a more than $35 trillion national debt.”

Per the release, the ERTC Repeal Act would advance the sunset date of the original program, and in addition to prohibiting processing of claims submitted after January 31, 2024, it would:

• Increase penalties for promoters from $1,000 to $10,000 for individuals and $200,000 for business promoters;
• Impose a $1,000 penalty for failure to comply with due diligence requirements; and
• Extend the statute of limitations period on assessments to six years.

According to the text of the bill, any businesses promoting the ERTC may also be subject to “75 percent of the gross income derived (or to be derived) by such promoter with respect to the aid, assistance, or advice.”

A corresponding Senate Measure spearheaded by Senators Tom Tillis (R-NC), Mitt Romney (R-UT),  and Joe Manchin (D-WV) was announced September 18th.

“Repealing the ERTC is a critical step towards addressing America’s debt crisis,” Tillis said in a statement. “It’s past time to eliminate this fraud-ridden pandemic-era policy so we can concentrate on getting our fiscal house in order.”

According to the Senate findings, the ERTC added approximately $230 billion to the U.S. deficit through Fiscal Year 2023 and was projected to ballon to as much as $550 billion. The IRS also announced in June that between 10% and 20% of claims showed “clear signs of being erroneous” while another 60% to 70% showed an “unacceptable risk” of being improper.

Under existing law, the credit will persist until April 25, 2025.

Matthew Holloway is a reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.

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