The Internal Revenue Service (IRS) has made considerable progress related to the Employee Retention Credit (ERC) backlog. The ERC is a refundable tax credit designed for businesses that continued paying their employees during the COVID-19 pandemic while business operations were halted due to a government order. More than 2.5 million claims have been filed since the program was enacted. The IRS claims processing was bogged down due to the complexity of amended returns. 99 percent of claims have been resolved as of mid-July 2023, which has resulted in legitimate businesses receiving the money they were due legally under the law.
“The further we get from the pandemic, we believe the percentage of legitimate claims coming in is declining,” Commissioner Danny Werfel told attendees at the IRS Nationwide Tax Forum in Atlanta last Tuesday. “Instead, we continue to see more and more questionable claims coming in following the onslaught of misleading marketing from promoters pushing businesses to apply. To address this, the IRS continues to intensify our compliance work in this area.” The IRS has increased audit and criminal investigation work on these claims, both on promoters as well as those businesses which filed false claims. The period of eligibility for the credit for affected businesses covers the time between March 13, 2020, and December 31, 2021. Under the current law, businesses can continue to file claims for the credit until April 15, 2025.
“The amount of misleading marketing around this credit is staggering, and it is creating an array of problems for tax professionals and the IRS while adding risk for businesses improperly claiming the credit,” Werfel said. “A terrible scenario is unfolding that hurts everyone involved — except the promoters.”
“This was not how the law was meant to work, and Congress can help with this situation,” Werfel added. “We will work with Treasury to explore legislative solutions we can share with Congress to help address fraud and error, including potentially putting an earlier ending date for businesses to claim the credit and increase IRS oversight of return preparers.”
The IRS reminds businesses to:
Work with a trusted tax professional. Eligible employers who need help claiming the credit should work with a trusted tax professional; the IRS urges people not to rely on the advice of those soliciting these credits. Promoters who are marketing this have a personal stake in making money; in many cases, they are not looking out for the best interests of those applying.
Request a detailed worksheet explaining ERC eligibility and the computations used to determine the ERC amount.
Don’t apply unless you believe you are legitimately qualified for this credit. Details about the credit are available on IRS.gov, and again a trusted tax professional – not someone promoting the credit – can provide critical professional advice on the ERC.
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