To amend the Internal Revenue Code of 1986 to establish procedures relating to the attribution of errors in the case of third party payors of payroll taxes, and for other purposes.
This bill adds a new provision (section 3513) to the Internal Revenue Code to govern how errors involving payroll tax credits are attributed when a third-party payor (such as a payroll service provider, fiduciary, agent, or professional employer organization) certifies or reports on behalf of an employer. The core idea is to specify who is responsible for liability when a certification used to claim payroll tax credits is in error. The employer generally bears liability, but the third-party payor may share in liability only for the portion of an errored certification that they knew or should have known was wrong. If the third party did not have constructive knowledge of an error, the employer bears all liability. The bill also protects the processing of credits from being delayed solely because a third party relied on another employer’s certification, and it authorizes the Secretary to request records from third parties to support enforcement. The term “third party payor” is broadened to include fiduciaries, agents, and entities described in existing law (including professional employer organizations). The new rules apply to audits, examinations, and assessments initiated after enactment.
Key Points
- 1Certification reliance: A third-party payor may rely on an employer’s certification when carrying out payroll tax requirements, unless the payor has constructive knowledge of an error (the certification includes representations, attestations, or similar documents).
- 2Liability allocation (constructive knowledge): If the third-party payor has constructive knowledge of an error, the employer is fully responsible for the liability, and the third-party payor is responsible only for the portion tied to the erroneous part of the certification.
- 3Liability allocation (no constructive knowledge): If the third-party payor did not have constructive knowledge, the employer bears sole responsibility for any liability arising from the error.
- 4Safe harbor and knowledge test: A third-party payor will be deemed not to have constructive knowledge for purposes of a payroll tax credit if (1) the certification states the employer is entitled to the credit, (2) the payor accurately reported the credit based on information certified by the employer, and (3) before claiming the credit, the payor verified the employer’s reported aggregate wages used to calculate the credit.
- 5Protections and records: The Secretary may not delay processing payroll tax credits or start audits solely because a credit was claimed by a third party relying on another employer’s certification, and may require third parties to provide information related to employers to which the Secretary could require information.