Payroll Consultants Bemoan Loss of Employee Retention Credit

November 29, 2021

The Honorable Charles P. Rettig
Commissioner
Internal Revenue Service
1111 Constitution Ave. NW
Washington, DC 20224

Dear Commissioner Rettig:

On behalf of PADGETT BUSINESS SERVICES® and the many small businesses affected by the recent retroactive sunset of the Employee Retention Tax Credit (ERTC), I write to you today regarding the impact that ending the ERTC early will have on small businesses. I ask that the IRS release guidance on the 4^th quarter ERTC immediately and hold small businesses harmless to the extent possible under the law.

PADGETT BUSINESS SERVICES® is a national accounting and tax preparation company with approximately 200 franchises across the U.S. serving tens of thousands of small business clients. Our office owners focus on providing sound advisory services, tax planning and preparation, general payroll support and more. Throughout the pandemic, we have helped small businesses secure millions of dollars in relief funding, giving us a unique understanding about the challenges they have faced through COVID-19 and the various programs crafted to aid them.

The ERTC was originally created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and amended by the Consolidated Appropriations Act of 2021. The American Rescue Plan, enacted in March, extended the credit to eligible employers through the 3^rd and 4^th quarters of 2021.

However, as you are aware, the recently passed infrastructure bill repeals the 4^th quarter extension retroactively for many small businesses. As the infrastructure bill was not signed into law until November 15, many businesses unknowingly chose to file for the 4^th quarter ERTC throughout October and early November. Without quick guidance and penalty relief, these small businesses could be harmed by a credit that was intended to originally to assist them through a difficult time.

To ensure that small businesses are not harmed by this early repeal of the ERTC, the IRS should use its full discretion to allow the affected businesses the necessary amount of time to pay back money received or withheld during the 4^th quarter without any penalties. Specifically, from the time that the IRS releases guidance on the ERTC, affected businesses should have the remainder of the current quarter and the entirety of the next quarter to pay back the money owed without any penalties or late charges. It is also important that the IRS release clear and comprehensive guidance for how businesses should plan to repay any money gained through the ERTC in the 4^th quarter. For example, questions will need to be answered on the role the 941 will play in documenting any money paid back to the IRS, other means of identifying funds paid back in the 4^th quarter or future quarters, and whether the money can be paid back through a payment plan.

The very reason for the existence of the ERTC was to assist struggling employers so that employees would not have to be laid off. Unfortunately, many of these employers were not prepared for the abrupt ending to this program, especially in the midst of the 4^th quarter. PADGETT BUSINESS SERVICES® is aware that the IRS is not in control of the legislation but is bound to enforcing it. Regardless, it is our hope that the IRS will choose to enforce this new change in a way that does not undo the much-needed help that the ERTC has provided.

If we can assist in any way, please do not hesitate to ask.

Sincerely,

Roger Harris, President
PADGETT BUSINESS SERVICES^®
Athens, GA