IRS Releases Final Regulations for Excess Employment Tax Credits under COVID-19 Legislation

​The Internal Revenue Service (IRS) and Department of the Treasury (Treasury) released a final rule and the removal of temporary regulations from 2020 and 2021 under sections of the Internal Revenue Code (IRC) issued under the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and the American Rescue Plan Act of 2021 (ARP). These final regulations authorize the assessment of any erroneous refund of the tax credits paid under paid sick and family leave and employee retention credits (ERC) provisions of these laws.

Specifically, the sections affected by this final rule are:

• sections 3111, 3131, 3132, 3134, and 3221of the IRC
• sections 7001 and 7003 of the FFCRA (including any increases in those credits under section 7005), and
• section 2301 of the CARES Act.
  

The final regulations are effective on July 24, 2023.