WASHINGTON – The Internal Revenue Service announced today that Direct File will be available for the 2025 tax filing season in double the number of states than last year’s pilot, and it will cover a wider range of tax situations, greatly expanding the number of taxpayers eligible to use the free e-filing service.  

State and eligibility expansion

For the 2025 tax filing season, eligible taxpayers in 24 states will be able to use Direct File: 12 states that were part of the pilot last year, plus 12 new states where Direct File will be available in the upcoming filing season. 

During the pilot last year, Direct File was available in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State and Wyoming. For the 2025 tax filing season, Direct File will also be available in Alaska, Connecticut, Idaho, Kansas, Maine, Maryland, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania and Wisconsin. 

In 2025, more than 30 million taxpayers in those 24 states will be eligible to use Direct File. Additional states could still join Direct File in 2025, and several states have expressed interest or announced that they will participate in Direct File in 2026. 

In addition to doubling the number of states where Direct File will be available, the service will also cover a wider range of tax situations for the 2025 filing season. During the pilot last year, Direct File covered limited tax situations, including wage income reported on a W-2 form, Social Security income, unemployment compensation and certain credits and deductions. For the 2025 filing season, Direct File will support 1099’s for interest income greater than $1,500, retirement income and the 1099 for Alaska residents reporting the Alaska Permanent Fund dividend. 

During the pilot, Direct File supported taxpayers claiming the Earned Income Tax Credit, Child Tax Credit and Credit for Other Dependents. This year, Direct File will also cover taxpayers claiming the Child and Dependent Care Credit, Premium Tax Credit, Credit for the Elderly and Disabled, and Retirement Savings Contribution Credits. In addition to covering taxpayers claiming the standard deduction and deductions for student loan interest and educator expenses, this year, Direct File will support taxpayers claiming deductions for Health Savings Accounts. Over the coming years, the IRS will gradually expand Direct File’s scope to support most common tax situations, focusing – in particular – on tax situations that impact working families. 

“We’re excited about the improvements to Direct File and the millions more taxpayers who will be eligible to use the service this year,” said IRS Commissioner Danny Werfel. “Above all, our goal is to improve the experience of tax filing itself and help taxpayers meet their obligations quickly and easily. Direct File will be a critical part of achieving that goal as we expand and improve the service.” 

Direct File service improvements

Direct File is a web-based service that works on mobile phones, laptops, tablets or desktop computers. It guides taxpayers through a series of questions to prepare their federal tax return step-by-step. Last year, thousands of Direct File users got help from IRS customer service representatives through a live chat feature in English and Spanish. Once taxpayers have completed their federal tax return, the Direct File system automatically guides them to state tools to complete their state tax filings.  

For the 2025 filing season, Direct File will include new features to make filing taxes quicker and easier. Direct File users can try a new chat bot to help guide them through the eligibility checker. Live chat will again be available in English and Spanish, and users can opt into additional authentication and verification, which will allow customer service representatives to provide more information. 

“User experience, both within the Direct File tool and the integration with state tax systems, will continue to be the foundation for Direct File moving forward,” Werfel said. “We will focus – first and foremost – on continuing to get it right. Accuracy and comprehensive tax credit uptake will be paramount concerns to ensure taxpayers file a correct return and get the refund to which they’re entitled.”  

Direct File’s role in the tax system

Following a successful pilot during the 2024 tax filing season, where more than 140,000 taxpayers across 12 states used Direct File, the IRS undertook a comprehensive review of the service and its role in the broader tax system.  

Taxpayers across the country told the IRS they want more no-cost electronic filing options. The IRS heard directly from hundreds of organizations across the country, more than 100 members of Congress, individual Direct File users and from those that are interested in using Direct File. Millions of taxpayers who did not live in one of the12 pilot states visited the Direct File website to learn more about the service or asked live chat assistors to make Direct File available in their state. 

In May 2024, the IRS announced that Direct File would be a permanent tax filing option, and the service is working with all states interested in participating. In the coming years, Direct File will continue to be one option among many from which taxpayers can choose, and it will complement important options, such as preparation by tax professionals or through commercial software providers, who are critical partners with the IRS in delivering a successful tax system for the nation.  

The IRS also noted another side effect of the Direct File pilot was increased attention on all free filing options, including an increase in usage of Free File. The IRS remains committed to the ongoing relationship with Free File, Inc., which has served taxpayers for two decades in the joint effort to provide free commercial software. Last spring, the IRS signed a five-year extension with industry to continue Free File. As the IRS works to expand Direct File, it will work to strengthen all free filing options for taxpayers, including Free File, the Volunteer Income Tax Assistance program (VITA) and the Tax Counseling for the Elderly program (TCE) – all of which saw increased usage and interest last year.  

“Direct File is an important component of a stronger, more comprehensive tax system that gives taxpayers electronic filing options that best suit their needs,” Werfel said. “It is a critical tool in the IRS’ effort to meet taxpayers where they are, give them options to interact with us in ways that work for them and help them meet their tax obligations as easily and quickly as possible.” 

Direct File will begin accepting tax returns when the filing season opens.

Notice 2024-73 provides guidance regarding discrete issues related to the application of the nondiscrimination rules of section 403(b)(12) with respect to the ERISA long-term, part-time (LTPT) employee rules for a section 403(b) plan. The ERISA LTPT rules were added under section 125 of the SECURE 2.0 Act of 2022 and are effective for plan years beginning after December 31, 2024.

This notice also (1) provides that the Department of the Treasury and the Internal Revenue Service anticipate issuing proposed regulations with respect to section 403(b)(12)(D) and guidance with respect to sections 202(c) and 203(b)(4) of ERISA, (2) announces that the final regulation that the Treasury Department and the IRS intend to issue related to long term, part time employees under section 401(k) plans will apply no earlier than to plan years that begin on or after January 1, 2026, and (3) asks for comments on the content of this notice. 

Notice 2024-73 will be in IRB:  2024-43, dated 10/21/2024.

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued guidance addressing long-term, part-time employees in 403(b) retirement plans under the SECURE 2.0 Act, which applies to 403(b) plans beginning in 2025. These plans are similar to 401(k) plans but are generally for employees of charities and public schools. 

Notice 2024-73 includes a question-and-answer section on the application of the nondiscrimination rules for 403(b) plans with respect to long-term, part-time employees, including application of the rules to permitted exclusions from participation for part-time employees and student employees. The notice informs the public that the Treasury Department and the IRS plan to issue additional guidance with respect to section 125 of the SECURE 2.0 Act, including proposed regulations with respect to the rules in today’s notice. 

The notice also announces that the final regulation the Treasury Department and the IRS plan to issue for 401(k) plans on long-term, part-time employees will apply no earlier than to plan years beginning on or after Jan. 1, 2026. A proposed regulation related to the rules for long-term, part-time employees in 401(k) plans was issued on Nov. 27, 2023. 

The Treasury Department and the IRS welcome public comments on this notice, which provides details on how to submit comments.

WASHINGTON — The Internal Revenue Service today announced disaster tax relief for individuals and businesses in the Confederated Tribes and Bands of the Yakama Nation in Washington state affected by wildfires that began on June 22, 2024. 

Affected taxpayers now have until Feb. 3, 2025, to file various federal individual and business tax returns and make tax payments.   

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes the Confederated Tribes and Bands of the Yakama Nation in Washington state.

Individuals and households that reside or have a business in these localities qualify for tax relief. The same relief will be available to any other localities added later to the disaster area. The current list of eligible localities is always available on the Tax relief in disaster situations page on IRS.gov. 

Filing and payment relief 

The tax relief postpones various tax filing and payment deadlines that occurred beginning on June 22, 2024, and ending on Feb. 3, 2025 (postponement period). As a result, affected individuals and businesses will have until Feb. 3, 2025, to file returns and pay any taxes that were originally due during this period. 

This means, for example, that the Feb. 3, 2025, deadline will now apply to: 

• Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the storms occurred. 
• Quarterly estimated income tax payments normally due on Sept. 16, 2024, and Jan. 15, 2025.
• Quarterly payroll and excise tax returns normally due on July 31, Oct. 31, 2024, and Jan. 31, 2025. 

In addition, penalties for failing to make payroll and excise tax deposits due on or after June 22, 2024, and before July 8, 2024, will be abated, as long as the deposits were made by July 8, 2024. 

The Disaster assistance and emergency relief for individuals and businesses page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.  

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief. 

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated. 

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Disaster area tax preparers with clients located outside the disaster area can choose to use the Bulk Requests from Practitioners for Disaster Relief option, described on IRS.gov. 

Additional tax relief 

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the prior year (the 2023 return filed this year). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means Oct. 15, 2025. Be sure to write the FEMA declaration number – 4823-Dr – on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details. 

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow. 

The IRS may provide additional disaster relief in the future. 

The tax relief is part of a coordinated federal response to the damage caused by these wildfires and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov. 

Reminder about tax return preparation options 

• Eligible individuals or families can get free help preparing their tax return at Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites. To find the closest free tax help site, use the VITA Locator Tool or call 800-906-9887. Note that normally, VITA sites cannot help claim disaster losses.
• To find an AARP Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669.
• Any individual or family whose adjusted gross income (AGI) was $79,000 or less in 2023 can use IRS Free File’s guided tax software at no cost. There are products in English and Spanish.
• Another Free File option is Free File Fillable Forms. These are electronic federal tax forms, equivalent to a paper 1040 and are designed for taxpayers who are comfortable filling out IRS tax forms. Anyone, regardless of income, can use this option.

• MilTax, a Department of Defense program, offers free return preparation software and electronic filing for federal tax returns and up to three state income tax returns. It’s available for all military members and some veterans, with no income limit.

Notice 2024-72 postpones various time-sensitive deadlines for taxpayers affected by the terrorist attacks in Israel throughout 2023 and 2024. The notice defines the covered area, identifies categories of “affected taxpayers,” and provides a list of the acts postponed. The postponement period is September 30, 2024, to September 30, 2025.  The separate determination of terroristic action and grant of relief in this notice will also postpone acts that were postponed by Notice 2023-71 until September 30, 2025 for taxpayers eligible for relief under both notices. 

Notice 2024-72 will be in IRB:  IRB 2024-43, dated 10/21/2024.

WASHINGTON — The Internal Revenue Service announced today that due to recent terrorist attacks in Israel, the agency is providing additional tax relief to affected individuals and businesses, postponing until Sept. 30, 2025, a wide range of deadlines for filing federal returns, making tax payments and performing other time-sensitive tax-related actions. 

Notice 2024-72, posted today on IRS.gov, covers similar groups but is separate from Notice 2023-71, which originally provided relief to taxpayers affected by the Oct. 7, 2023 attacks in Israel. 

In both Notice 2023-71 and Notice 2024-72, the IRS is providing relief to taxpayers who, due to the terrorist attacks, may be unable to meet a tax-filing or tax-payment obligation, or may be unable to perform other time-sensitive tax-related actions. 

Today’s notice (along with Notice 2023-71) postpones various tax filing and payment deadlines that occurred or will occur during the period from Oct. 7, 2023, through Sept. 30, 2025, for taxpayers eligible for relief under both notices. As a result, affected individuals and businesses have until Sept. 30, 2025, to file returns and pay any taxes that are due during this period. See Notice 2024-72 for additional relief provided and who qualifies for the relief. 

The IRS automatically identifies taxpayers whose principal residence or principal place of business is located in the covered area based on previously filed returns and applies relief. Other eligible taxpayers, or their representatives, whose filing address is outside the covered area can obtain relief by calling the IRS disaster hotline at 866-562-5227. Alternatively, international callers may call 267-941-1000. 

Reminder about tax-preparation assistance 

Any individual or family whose adjusted gross income (AGI) was $79,000 or less in 2023 can use IRS Free File’s Guided Tax Software at no cost. There are products available in English and Spanish. 

Another Free File option is Free File Fillable Forms. These are electronic federal tax forms, equivalent to a paper Form 1040, and are designed for taxpayers who are comfortable filling out IRS tax forms. Anyone, regardless of income, can use this option.

WASHINGTON — The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs are currently recruiting volunteers for the upcoming filing season. 

Each year, thousands of volunteers help their community and gain invaluable professional experience. Volunteers often include students, tax professionals, retirees and those looking to help their community. 

VITA/TCE sites can be found nationwide and prepare millions of tax returns each year for low-to moderate-income taxpayers at no cost. The free tax program is generally available for individuals and families with low to moderate incomes and help underserved populations such as persons with disabilities, limited English speakers, senior citizens and more. 

No experience is necessary to become a VITA or TCE volunteer. Free specialized training is provided by the IRS. Available positions are not limited to tax preparation and can include interpreters, greeters and computer specialists. 

Volunteers have the option to participant at both in-person and virtual sites. Hours are often flexible with many sites operating at night and on weekends. Finding a nearby free tax help location is easy. They can often be found in local libraries, community centers, schools and churches. Locate the VITA/TCE site closest to you by using the VITA Locator Tool. 

The IRS’ peak period for recruiting volunteers is October through January. Individuals can sign up during other months, but their information will be held until IRS partners are accepting volunteers for the next filing season. Those who signed up within the last two months do not need to sign up again unless their contact information has changed.  

To learn more about becoming a VITA/TCE volunteer, visit IRS Tax Volunteers. Those interested can sign up using the VITA/TCE Volunteer and Partner Sign Up. Approximately 14 days after signing up, the IRS will provide a list of available local VITA/TCE sites and an invite to a virtual orientation.

WASHINGTON — The Internal Revenue Service today announced disaster tax relief for individuals and businesses in parts of Illinois affected by severe storms, tornadoes, straight-line winds and flooding that began on July 13, 2024. 

Affected taxpayers now have until Feb. 3, 2025, to file various federal individual and business tax returns and make tax payments.   

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes Cook, Fulton, Henry, St. Clair, Washington, Will and Winnebago counties in Illinois. 

Individuals and households that reside or have a business in any one of these localities qualify for tax relief. The same relief will be available to any other counties added later to the disaster area. The current list of eligible localities is always available on the Tax relief in disaster situations page on IRS.gov. 

Filing and payment relief 

The tax relief postpones various tax filing and payment deadlines that occurred beginning on July 13, 2024, and ending on Feb. 3, 2025 (postponement period). As a result, affected individuals and businesses will have until Feb. 3, 2025, to file returns and pay any taxes that were originally due during this period. 

This means, for example, that the Feb. 3, 2025, deadline will now apply to: 

• Any individual, business or tax-exempt organization that has a valid extension to file their 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the storms occurred. 
• Quarterly estimated income tax payments normally due on Sept. 16, 2024, and Jan. 15, 2025.
• Quarterly payroll and excise tax returns normally due on July 31, Oct. 31, 2024, and Jan. 31, 2025. 

In addition, penalties for failing to make payroll and excise tax deposits due on or after July 13, 2024, and before July 29, 2024, will be abated, as long as the deposits were made by July 29, 2024. 

The Disaster assistance and emergency relief for individuals and businesses page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.  

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief. 

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated. 

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Disaster area tax preparers with clients located outside the disaster area can choose to use the Bulk Requests from Practitioners for Disaster Relief option, described on IRS.gov. 

Additional tax relief 

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2024 return normally filed next year), or the return for the prior year (the 2023 return filed this year). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means Oct. 15, 2025. Be sure to write the FEMA declaration number – 4819-DR – on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details. 

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details. 

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow. 

The IRS may provide additional disaster relief in the future. 

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov. 

Reminder about tax return preparation options 

• Eligible individuals or families can get free help preparing their tax return at Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites. To find the closest free tax help site, use the VITA Locator Tool or call 800-906-9887. Note that normally, VITA sites cannot help claim disaster losses.
• To find an AARP Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669.
• Any individual or family whose adjusted gross income (AGI) was $79,000 or less in 2023 can use IRS Free File’s guided tax software at no cost. There are products in English and Spanish.
• Another Free File option is Free File Fillable Forms. These are electronic federal tax forms, equivalent to a paper 1040 and are designed for taxpayers who are comfortable filling out IRS tax forms. Anyone, regardless of income, can use this option.

• MilTax, a Department of Defense program, offers free return preparation software and electronic filing for federal tax returns and up to three state income tax returns. It’s available for all military members and some veterans, with no income limit.

Issue Number:  2024-39

Inside This Issue

1. IRS opens new process for payroll companies, third-party payers to help clients resolve incorrect claims for the Employee Retention Credit
2. Chief of IRS Independent Office of Appeals selected
3. Technical Guidance

1.  IRS opens new process for payroll companies, third-party payers to help clients resolve incorrect claims for the Employee Retention Credit

The IRS is opening a supplemental claim process to help third-party payers and their clients resolve incorrect claims for the Employee Retention Credit (ERC). Third-party payers report and pay clients’ federal employment taxes under the third-party payer’s Employer Identification Number. They handle clients’ payroll and tax reporting duties. Some of these TPPs filed ERC claims for multiple employers. If a third-party payer’s client has since determined it is ineligible for the ERC and wants to resolve their claim, it is the third-party payer that needs to correct it. This supplemental claim process lets a third-party payer that filed a prior claim with multiple clients “withdraw” only some clients while maintaining the claims of the qualifying clients.

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2.  Chief of IRS Independent Office of Appeals selected

The IRS announced that Elizabeth Askey has been selected to serve as the Chief of the IRS Independent Office of Appeals. Askey will set strategy and oversee the operations of Appeals, which resolves tax controversies between taxpayers and the IRS without litigation. Askey has served as the Deputy Chief of Appeals since December 2022 and has been acting as the Appeals Chief since April, responsible for approximately 1,750 Appeals employees nationwide. Appeals is independent of the IRS compliance functions, including the examination and collection areas that make tax assessments and initiate collection actions.

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3.  Technical Guidance

Revenue Ruling 2024-22 holds that Bourse de Montréal (MX) is a “qualified board or exchange” within the meaning of section 1256(g)(7)(C). MX is a regulated exchange of Québec, Canada that offers electronic trading. Revenue Ruling 2024-22 will be published in IRB: 2024-43 DATED: October 21, 2024

Revenue Procedure 2024-38 provides guidance on the effect on the income requirements under sections 142(d) and 42 of the alternative income eligibility requirements for the Department of Housing and Urban Development–Veterans Affairs Supportive Housing (HUD–VASH) program. Revenue Procedure 2024-38 will be in IRB-2024-43, dated October 21, 2024.

Notice 2024-68 announces the special per diem rates effective October 1, 2024, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home. This notice provides the special transportation industry rate, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method. Use of a per diem substantiation method is not mandatory.

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WASHINGTON — The Internal Revenue Service announced today that the agency is opening a supplemental claim process to help third-party payers and their clients resolve incorrect claims for the Employee Retention Credit.

Third-party payers report and pay clients’ federal employment taxes under the third-party payer’s Employer Identification Number. They handle clients’ payroll and tax reporting duties. Some of these TPPs filed ERC claims for multiple employers. If a third-party payer’s client has since determined it is ineligible for the ERC and wants to resolve their claim, it is the third-party payer that needs to correct it.

This supplemental claim process lets a third-party payer that filed a prior claim with multiple clients “withdraw” only some clients while maintaining the claims of the qualifying clients.

“The supplemental claim program is a critical step to improve the IRS’s ability to process Employee Retention Credit claims for this more complex segment of taxpayers,” said IRS Commissioner Danny Werfel. “As we continue to accelerate and intensify our work in this area to help qualifying small businesses and protect against improper claims, we continue to explore and develop additional ways to speed our work on this incredibly detailed credit where the number of claims exploded following aggressive marketing.”

 

About supplemental claims

A supplemental claim is an adjusted employment tax return that allows a third-party payer to correct and/or consolidate previous claims that they filed on or before Jan. 31, 2024, if those claims have not yet been processed by the IRS.

By filing a supplemental claim, the third-party payer is asking the IRS not to process outstanding adjusted employment tax returns for the tax period. The IRS will treat claims filed before the supplemental claim as if they were never filed.

The supplemental claim process is for third-party payers to which all of the following apply:

• The third-party payer has filed one or more claims aggregating Employee Retention Credits for itself and/or clients using the TPP’s Employer Identification Number.
• The third-party payer made the claim on an adjusted employment tax return (Forms 941-X, 943-X, 944-X or CT-1X).
• The IRS has not processed any of the claims the third-party payer is including in the supplemental claim.

This process is not for:

• Common law employers who did not use a third-party payer and instead filed adjusted employment tax returns using their own Employer Identification Number. These employers may be eligible for either the claim withdrawal process if their claim is pending, or for the IRS’s second Voluntary Disclosure Programif they received the ERC either as a refund or a credit against tax owed.
• Third-party payers that received the full amount of ERC claimed on behalf of themselves and their clients – either as a refund or a credit against tax owed. They may be eligible for the IRS’s second Voluntary Disclosure Program.

Submitting supplemental claims related to ERC

A third-party payer must prepare one supplemental claim for each tax period filed on or before Jan. 31, 2024. Each claim must include the correct amount of ERC and any other corrections for that tax period. The third-party payer should use the adjusted employment tax return for their type of business – Form 941-X, Form 943-X, Form 944-X or Form CT1-X – to prepare the supplemental claim.

The third-party payer should not include ERC amounts that were filed after Jan. 31, 2024. The amount of ERC on the supplemental claim must be equal to or less than the cumulative amount of ERC claimed on the returns the third-party payer is replacing by filing the supplement claim.

Third-party payers can submit a supplemental claim using a computer or mobile device to fax the documents by 11:59 p.m., Nov. 22, 2024.

For details see Filing a Supplemental Claim for the Employee Retention Credit and Supplemental Claim Frequently Asked Questions for Third-Party Payers.

What happens next

The IRS will review the supplemental claim to make sure it has all items necessary for it to be processed.

If the supplemental claim is complete, the IRS will review the claim and determine if it will be accepted as filed, partially allowed/disallowed, or if the supplemental claim needs additional review or examination.

The supplemental claim becomes the sole adjusted employment tax return for the tax period. The IRS will review the supplemental claims instead of adjusted employment tax returns filed on or before Jan. 31, 2024.