Who’s liable for employment tax underpayments for ERC?

If a business that uses a third-party payer (TTP) improperly claimed an employee retention credit (ERC), who’s liable for an employment tax underpayment: the business or the TPP, such as a certified professional employer organization (CPEO), that the business used? The IRS says a TPP (or a CPEO) is liable for any underpayment resulting from an improperly claimed employment tax credit that the TPP claimed for the client (employer) on the TPP’s employment tax return filed under the TPP’s EIN, where the credit was claimed based on wages paid by the TPP to the client’s employees. This rule applies to the ERC as it would any other employment tax credit. Contractually, if the TPP is liable to the IRS, it may have a claim against the employer; it depends on the facts involved. #IdeaoftheDay