A $78 billion bipartisan bill aims to enhance the child tax credit and restore business tax provisions, intending to be fully paid for through changes to the employee retention tax credit (ERC).
The ERC, originally designed to aid businesses during the pandemic, has faced challenges with eligibility and fraud.
The proposed legislation would address these issues, imposing heavier penalties on fraud and moving the filing deadline for backdated claims.
“The idea in theory was, ‘OK, we know businesses aren’t getting any revenues to pay, so what if we have some sort of tax credit to help employers keep their employees — it will be good for employers, it will be good for employees,’” Niskanen Center director Joshua McCabe said.
“We started to see a lot of folks, those promotors, coming out and basically aggressively campaigning and advertising for businesses to basically go back and look at their 2020, 2021 books and find any sort of rationale for why they may be eligible to claim for qualified wages and other expenses for the credit,” senior policy analyst Garrett Watson said.
“The rationale — if you haven’t claimed it by now, it’s much more likely that you weren’t eligible for it to begin with,” Watson said.
“Originally designed to help small businesses impacted by COVID lockdowns, the pandemic-era program has ballooned in cost and suffered from rampant fraud,” a news release stated.
The bill has received support from the White House and is seen as a step toward fiscal responsibility.
While uncertainties remain about the IRS’s ability to recover funds from misused credits, the overall aim is deficit neutrality.
“We are also pleased that the proposed tax package is fully paid for with other revenue measures, consistent with the president’s commitment to fiscal responsibility,” White House spokesman Michael Kikukawa said.
“While the president will continue to fight to restore the full expanded child tax credit that helped cut child poverty in half, the bipartisan tax bill is a welcome step forward, and Congress should pass it.”
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