IRS Enters Next Stage of Employee Retention Credit Work; Review Indicates Vast Majority Show Risk of Being Improper

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IRS Enters Next Stage of Employee Retention Credit Work; Review Indicates Vast Majority Show Risk of Being Improper

In a new release on June 20, 2024, the IRS stated that it has gone through an intensive review of Employee Retention Credit (ERC) claims, focusing on denying high-risk, improper claims while providing some guidance on the processing of perceived credit eligible taxpayers. The review revealed a significant number of believed to be fraudulent claims, with 10-20% being high-risk and 60-70% showing unacceptable risk levels. The IRS plans to deny tens of thousands of claims and scrutinize others more closely in the coming weeks. Further, claims received before last fall’s moratorium may be processed, with initial payments expected later this summer but at a slower pace.

The IRS urges taxpayers with pending ERC claims to await further instructions as processing will take time. The agency continued to reinforce the risks of relying on promoters and encouraged consulting legitimate tax professionals as compliance efforts, including criminal investigations and audits, to counter improper claims is anticipated. It appears that the processing moratorium on new ERC claims remains in place, and the IRS is evaluating the need for additional legislative action with Congress.

Please review our prior communication on this subject for resources associated with ERC eligibility, withdrawal and voluntary disclosure programs.

If you have any questions or concerns, please let us know as this can be a complex area of employment tax.