IRS accelerates employee retention credit claims processing
The IRS has taken significant steps to expedite the processing of Employee Retention Credit (ERC) claims while continuing to crack down on improper claims.
This action aims to support small businesses and prevent fraudulent payments in the ERC program, which has seen a surge in claims due to misleading marketing.
Actions to prevent improper payments
The IRS is committed to preventing improper payments by thoroughly reviewing ERC claims. Recent findings have shown a high rate of improper claims, leading the IRS to intensify its audit efforts and pursue both civil and criminal investigations.
These measures are part of a broader initiative to ensure that only legitimate claims are processed.
Recent measures include:
- Disallowance letters: The IRS has issued 28,000 disallowance letters to businesses with high-risk claims, potentially preventing up to $5 billion in improper payments.
- Audits: Thousands of audits are currently underway to verify the validity of ERC claims.
- Criminal investigations: The IRS has initiated 460 criminal cases related to fraudulent ERC claims, with ongoing investigations.
Accelerated payments for valid claims
While cracking down on improper claims, the IRS is also moving forward with payments for legitimate ERC claims.
The agency has identified 50,000 valid claims that will be processed quickly, with payments expected to begin in September 2024.
Key points:
- Processing low-risk claims: The IRS is prioritizing low-risk claims for quicker payments.
- Ongoing processing: Additional valid claims are expected to be processed and paid out in the fall.
Navigating the complex ERC landscape
The IRS acknowledges the complexity of the ERC program, which was designed to help businesses during the pandemic.
To reduce the risk of improper payments, the agency is methodically processing claims and will continue to collaborate with the tax professional community to navigate the evolving landscape.
Appeal process for denied claims
The IRS is aware of concerns regarding potential errors in the disallowance letters. If a claim has been improperly denied, taxpayers have the option to file an administrative appeal.
The IRS is committed to correcting any errors and ensuring that valid claims are processed accurately.
Ongoing ERC compliance efforts
The IRS continues to enforce compliance within the ERC program through several initiatives:
- ERC claim withdrawal program: Over 7,300 entities have voluntarily withdrawn ERC claims, totaling $677 million.
- Voluntary disclosure program: The IRS received more than 2,600 applications disclosing $1.09 billion worth of credits during the Voluntary Disclosure Program (VDP).
- Promoter investigations: The IRS is actively investigating tax promoters and preparers suspected of promoting improper ERC claims.
Conclusion
The IRS remains focused on balancing the need to support legitimate businesses with the importance of preventing improper ERC claims
By accelerating payments for valid claims and intensifying audits and investigations, the agency is working to ensure the integrity of the ERC program while providing timely relief to eligible businesses.