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.
Summary
What This Bill Does
This bill adds Internal Revenue Code section 3513 for payroll-tax third-party payors. A professional employer organization, certified professional employer organization, agent, fiduciary, or similar third-party payor may rely on an employer certification unless it knew or should have known the certification was wrong. If the payor has no constructive knowledge, the employer has sole liability for the error; if the payor did have constructive knowledge, the payor is liable only for the portion tied to what it knew or should have known. The IRS may require information from the payor, but it may not delay payroll tax credits for other employers or initiate audits solely because the third-party payor filed an erroneous return in reliance on another employer's certification.
Who Benefits and How
Professional employer organizations benefit because they can rely on employer certifications without taking full liability for unknown payroll-tax errors. Certified professional employer organizations benefit from a clearer constructive-knowledge standard for payroll tax credit claims. Employers with valid payroll tax credits benefit because their credit processing cannot be delayed solely due to another employer's certification error. Payroll service agents benefit because liability is tied to information they knew or should have known rather than every employer representation.
Who Bears the Burden and How
Employers certifying payroll tax credits bear primary liability for errors in their own certifications. Third-party payors with constructive knowledge remain liable for the portion of tax, interest, or penalties tied to known errors. IRS payroll tax staff must apply the constructive-knowledge standard and process credits without blanket delays. Employer tax departments must maintain accurate certifications and wage records for third-party payors and IRS review.
Key Provisions
- Authorizes third-party payors to rely on employer payroll-tax certifications absent constructive knowledge of error.
- Assigns sole liability to the employer when the payor did not know and should not have known the certification was wrong.
- Limits third-party payor liability to the portion of an error tied to constructive knowledge.
- Prohibits IRS credit delays or audits of other employers solely because a third-party payor relied on an erroneous certification.
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers with clause-level evidence links.
At a Glance
What This Bill Does
Creates payroll-tax error attribution rules allowing third-party payors to rely on employer certifications unless they have constructive knowledge of an error, while assigning erroneous certification liability primarily to the employer.
Key Policy Areas
Tax, Payroll, Small Business
Primary Purpose
Creates payroll-tax error attribution rules allowing third-party payors to rely on employer certifications unless they have constructive knowledge of an error, while assigning erroneous certification liability primarily to the employer.
Policy Domains
Resolution provisions
Identified Gains
- Professional employer organizations
- Certified professional employer organizations
- Employers with valid payroll tax credits
- Payroll service agents
Identified Costs
- Employers certifying payroll tax credits
- Third-party payors with constructive knowledge
- IRS payroll tax staff
- Employer tax departments
Sponsors
Legislative Progress
In CommitteeMr. Thompson of California (for himself and Ms. Van Duyne) …
Referred to the House Committee on Ways and Means.
Introduced in House
Stakeholder Effects
cui bono?How this legislation distributes effects. Mention counts reflect frequency, not effect magnitude.
Certified professional employer organizations, Professional employer organizations
Employers certifying payroll tax credits, Employers with valid payroll tax credits
Positive-direction: Employers with valid payroll tax credits
Negative-direction: Employers certifying payroll tax credits
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology