Without Immediate Action from the IRS, NH Businesses Could Pay More in Up-Front Taxes This Year
WASHINGTON – After hearing from New Hampshire businesses about delays in receiving the Employee Retention Tax Credit, U.S. Senators Maggie Hassan (D-NH), a member of the Senate Finance Committee, and Ron Wyden (D-OR), Chair of the Finance Committee, are pushing the IRS and the Treasury Department to get this relief out the door as soon as possible, as well as ensure that businesses don’t pay more in up-front taxes this year as result of these tax credit delays.
“We write to urge the Treasury Department (Treasury) and Internal Revenue Service (IRS) to provide relief ahead of the upcoming tax filing deadline for small businesses that are still waiting for their Employee Retention Tax Credit (ERTC) payments,” the Senators wrote. “Without quick action from your agencies, these small businesses will face higher up-front tax liabilities because of IRS’s delayed payments of the ERTC.”
The Senators’ push comes as businesses in New Hampshire and across the country are still waiting to receive their Employee Retention Tax Credit (ERTC) payments from the IRS. Typically, businesses deduct wages paid to employees in their tax filings, but businesses that claim the ERTC are not allowed to both claim the tax credit and apply a tax deduction for wages, which means that any business that is still waiting on their tax credit from the IRS could be paying more in up-front taxes.
The Senators are calling on IRS and Treasury to provide greater flexibility to small businesses during this year’s tax filing season: “We urge the Treasury and IRS to use available authority to provide relief to these small businesses, such as by waiving relevant penalties so that small businesses can time their federal tax payments around the receipt of the ERTC.”
Last week, Senator Hassan pressed IRS Commissioner Charles Rettig on these tax credit delays during a Senate Finance Committee hearing. During the hearing, the Senator highlighted an owner of Dunkin’ locations in New Hampshire, John Motta, who has still not received his businesses’ ERTC payments.
“As the owner of Dunkin’ locations across the state, I am relying on the Employee Retention Tax Credit to help support my business and employees, and IRS' delays are creating unexpected financial challenges,” said John Motta, owner of Dunkin locations across New Hampshire. “As soon as I told Senator Hassan about these delays, she immediately started working to resolve this issue and stand up for businesses like mine, and I am grateful for her efforts.”
Senator Hassan has led efforts to ensure that New Hampshire businesses can fully utilize the Employee Retention Tax Credit, and successfully worked with Senator Richard Burr (R-NC) to include a measure in the funding bill that passed into law in 2020 to allow eligible small employers to participate in the Paycheck Protection Program and claim the Employee Retention Tax Credit. Additionally, thanks to efforts by Senator Hassan, the American Rescue Plan provided payroll assistance through the Employee Retention Tax Credit to new small businesses started during the pandemic, which at the time could not access this tax relief. The American Rescue Plan also expanded the Employee Retention Tax Credit in order to further support businesses hardest hit by the pandemic following bipartisan calls led by Senator Hassan.
To read the Senator’s full letter, see below or click here.
Dear Secretary Yellen and Commissioner Rettig:
We write to urge the Treasury Department (Treasury) and Internal Revenue Service (IRS) to provide relief ahead of the upcoming tax filing deadline for small businesses that are still waiting for their Employee Retention Tax Credit (ERTC) payments. Without quick action from your agencies, these small businesses will face higher up-front tax liabilities because of IRS’s delayed payments of the ERTC.
Congress created the ERTC on a bipartisan basis to help employers struggling during the COVID-19 crisis. In 2020 and 2021, this refundable payroll tax credit covered a share of eligible wages and other compensation provided to employees by the hardest-hit small businesses. However, the IRS still has not sent out ERTC payments for many businesses, due to the current backlog of unprocessed tax returns at the IRS. Small businesses need this relief, and the IRS should take all possible steps to provide ERTC payments as rapidly as possible.
A further consequence of the tax return backlog is that small businesses waiting for their 2021 ERTC payments will face higher up-front tax liabilities when filing their tax returns on April 18, 2022. In 2020 and 2021, the hardest-hit small businesses could choose either to claim the ERTC for eligible wages paid to employees, or to deduct these wages, but not both. As a result, certain small businesses that claimed the ERTC will report reduced wage deductions when filing their taxes this year, resulting in a higher tax liability – even if they are still waiting for the ERTC refunds that will more than make up for these reduced deductions.
We urge the Treasury and IRS to use available authority to provide relief to these small businesses, such as by waiving relevant penalties so that small businesses can time their federal tax payments around the receipt of the ERTC.