On October 18, the Internal Revenue Service (IRS) announced its criteria for evaluating a business’ eligibility for the pandemic-era employee retention tax credit (ERTC). In their memo on how the agency will be examining still-pending ERTC claims, the IRS said that ERTC eligibility required an order from the Occupational Safety and Health Administration (OSHA) to prevent spreading COVID-19 to qualify for the credit. Reliance on guidance only would be insufficient, the IRS said.

Generally, communications from OSHA are not considered “orders from an appropriate government authority that limit commerce, travel, or group meetings,” the IRS’ Office of Chief Counsel said in its memo. The memo came in response to an inquiry from an employer as to whether employers could rely on OSHA guidance in determining their eligibility for the ERTC.

The ERTC, which provides for a tax credit against 50 percent of employment tax payments after March 12, 2020, and before January 1, 2021, has been the subject of close scrutiny by the IRS due to evidence of widespread misuse or fraud among employers seeking to claim the credit. The IRS has announced that the agency’s Criminal Investigation division has initiated investigations into more than $3.4 billion in ERTC claims that appear to suggest potential fraud.

Prospects: The IRS is going to a lot of trouble to caution taxpayers who have claimed or plan to claim the ERTC for the time in question to be sure they actually do qualify for the tax credit. Many NAIFA members have used or are looking into using the credit, and so would be well served by making sure they actually do qualify for it.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.