Businesses Who Utilized PEOs to File for ERC Should Request Documentation — Frost Law (Apr. 2, 2025)

Summary

A Frost Law tax advisory by Zachary Lyda, published on April 2, 2025, about businesses that used Professional Employer Organizations (PEO) or Certified Professional Employer Organizations (CPEO) to file Employee Retention Credit (ERC) claims. The article says businesses should ask the PEO for the Schedules R and Forms 941-X for each quarter, for information on when the original claims were filed, for IRS Form 941 account transcripts, and for confirmation of whether the PEO used the supplemental procedures issued during 2024. It states that the IRS has said claims originally filed but not included in the supplemental will be deemed withdrawn.

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“Businesses Who Utilized PEOs to File for ERC Should Request Documentation — Frost Law (Apr. 2, 2025).” Original at askfrost.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/zachary-lyda-frost-law-apr-2-2025-9b65db55f3/, SHA-256 5ee33f9cae69de9daeae99c7f2d80bfbd9a2b8324d41e52eef3a92b73ccb77d2.

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Authors

Zachary Lyda

Many businesses utilized Professional Employer Organizations (PEO) or Certified Professional Employer Organizations (CPEO) 1 to file their Employee Retention Credit (ERC) claims. Given that PEOs filed ERC claims under their Employer Identification Number (EIN), a lot of the information related to the filings can be hidden from the view of the underlying business. While some PEOs have been better than others at keeping their clients informed of their ERC filings, it is important that businesses be permitted to have access to the tax forms used to claim the credit on their behalf. To that end, businesses are strongly encouraged to ask their PEO for information related to their ERC claims so that they can take action to help secure their refund.

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First, businesses should request the Schedules R and Forms 941-X for each of the quarters that the PEO filed for ERC on the business’s behalf. It is likely that the PEO will redact these documents to only include the information relevant to the requesting business since a Schedule R will contain information about all the businesses for which the PEO filed for ERC. Unfortunately, there have been instances where a PEO failed to include a customer in a filing, and thus, obtaining verification is critical.

Second, businesses should request information regarding when the PEO filed the business’s original claims for ERC. Optimally, the PEO will have tracking data to indicate the Internal Revenue Service’s (IRS) receipt of the claims. If not, the PEO should at least be able to provide the date on which it mailed the returns to the IRS.

Third, the business should request IRS Form 941 account transcripts covering the period when ERC was claimed. These transcripts can show if the IRS received the refund claim in addition to the date that the IRS records indicate the return was received. With a retroactive termination of the ERC program remaining in discussions on The Hill, when the claim was filed may be paramount.

Fourth, the business should confirm if the PEO utilized the supplemental procedures issued during 2024 to consolidate all its ERC claims. 2 More importantly, if the PEO did use those procedures, the business should verify that their claims were included in the supplemental. The IRS has stated that any claims originally filed but not included in the supplemental will be deemed withdrawn. While that may not be the correct legal conclusion, the first step is to know whether the PEO included the business’s filings on any supplemental claims.

By taking these steps, businesses can become better equipped to pursue their ERC refunds. Frost Law can assist businesses in proactively going after refund claims through litigation. If you need assistance with obtaining your ERC refund, don't hesitate to reach out to us at (410) 497-5947 or schedule a confidential consultation with our team of tax attorneys.

Footnotes

- For simplicity I only refer to PEOs in this article. As far as is relevant here, PEO and CPEO are interchangeable.
- You can read more about the program here: https://askfrost.com/news/peo-erc-supplemental-claim.

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