Despite moratorium, IRS gets 20,000 ERC claims weekly, Werfel says Source: The Tax Adviser Published on 2024-04-18

Despite a moratorium since September on processing new claims for the pandemic-era employee retention credit (ERC), the IRS still averages 20,000 new applications weekly, Commissioner Danny Werfel told the Senate Finance Committee Tuesday.

Werfel’s comments came as Committee Chairman Sen. Ron Wyden, D-Ore., questioned him about the ERC and whether a tax bill — passed by the House in January and now stalled in the Senate — would help the IRS fight fraud in the program.

The top line items of the Tax Relief for American Families and Workers Act of 2024, H.R. 7024, include a retroactive bar on additional ERC claims as of Jan. 31, 2024. The deadline under current law is April 15, 2025.

The bill includes other ERC enforcement provisions, including extending the statute of limitation on assessment for the ERC from five years to six years from the date of the claim, defining who qualifies as a “COVID-ERTC promoter,” and increasing certain penalties and reporting requirements for those who are such promoters.

“There’s two things being harmed if that bill doesn’t get passed,” Werfel told the committee. “One, the financial bottom line of the U.S. government because you’re giving us tools to crack down on fraud. And two, in our big inventory of claims, there are still eligible claims in the midst, but they’re very hard to find. It’s like finding a needle in a haystack. And so, with your help, we can get those eligible claims found and issued and hold back from issuing the ineligible claims.”

The IRS has taken several enforcement actions to stop bogus ERC claims, including initiating a processing moratorium in September 2023. A specific resumption date has not been determined, but it could be in the late spring, the IRS said in a news release in March. 

Wyden assured Werfel that supporters of the tax bill will be “pulling out all the stops” to get it passed.

Werfel also briefly touched on technology modernization when questioned by Sen. Maggie Hassan, D-N.H., who said her constituents complain about delays in IRS services such as getting their refunds.

“Well on this I have some good news, which is the main system at the IRS that is the engine for all individual returns is on the cusp of finally being turned on into a modern solution, and that is coming after this filing season,” Werfel said. “And what we’ll be able to describe to you and the American people and your constituents is how that will impact them with more real-time information, faster processing.”

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.

DOL finalizes broad ‘retirement security rule’ Source: Journal Of Accountancy News Published on 2024-04-24

The U.S. Department of Labor (DOL) on Tuesday released final regulations (RIN 1210-AC02) that will subject the financial services industry to new requirements designed to protect retirement investors from receiving bad or self-interested investment advice.

“This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest,” DOL Acting Secretary Julie Su said in a news release.

The new regulations, known as the “retirement security rule,” will go into effect Sept. 23, but court challenges are anticipated. In 2016, when DOL finalized a somewhat similar fiduciary rule, the Fifth Circuit struck it down.

The AICPA had recommended in a comment letter that the DOL’s new rules protecting retirement investors follow the AICPA Statement on Standards in Personal Financial Planning Services, which is part of the AICPA’s Code of Professional Conduct, but that approach was not adopted.

Broader definition of who is a fiduciary

The DOL’s new rule widens the situations in which a financial services provider qualifies as an “investment advice fiduciary” for purposes of the Employee Retirement Income Security Act (ERISA) and thus owes duties of prudence and loyalty to retirement investors.

Under the final rule, a person is an investment advice fiduciary if they make an investment recommendation to a retirement investor for a fee or other compensation and either:

  • Make investment recommendations to investors on a regular basis as part of their business, and the recommendation is provided under circumstances indicating that it is based on the retirement investor’s individual circumstances and may be relied upon as being in their best interest; or
  • State that they are acting as a fiduciary.

This definition is somewhat narrower than the one contained in the Oct. 31, 2023, proposed regulations. Most other changes made in the final regulations were relatively minor.

Impact on CPA financial planners

DOL Deputy Assistant Secretary Timothy Hauser explained to the JofA in January that some CPA financial planners may be subject to new requirements when they deal with retirement investors.

“This is not the regulation of CPAs per se,” Hauser said. But “if the person really regularly makes investment recommendations, and if they do it in circumstances that indicate they’re acting in the customer’s best interest, they would have some additional obligations.”

— Dave Strausfeld, J.D., is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact him at David.Strausfeld@aicpa-cima.com.