Update on the Status of Employee Retention Credit Claims

While the Internal Revenue Service (“IRS”) is continuing to process thousands of the Employee Retention Credits (“ERC”), the IRS has recently announced that it will begin to deny the highest risk claims while processing the lower risk claims. IRS is also consulting with Congress to create legislative action to prior a future moratorium of the claims.

The IRS has announced that it is processing the low-risk claims in order to ensure that small businesses are eligible and will begin to send out the Employee Retention Credit payments to those taxpayers. This method of ERC payment processing will ensure that only those who qualify for the ERC will be receiving payments. The IRS is aware that there are many small businesses that are awaiting these funds and in are in need of these funds; thus, those small businesses in the lowest risk group should start to receive their ERC payments shortly. This ERC payment process will ensure that the IRS does not make improper payments to non-qualifying taxpayers.

In the high risk ERC group, the IRS plans to deny 10 to 20% of the high risk claims, which will be more than 10,000 ERC claims that are currently pending. These high risk claims are claims that the IRS has determined are most likely erroneous claims. The IRS also estimates that between 60% and 70% of the claims are at an unacceptable risk of being improper.

At this time, there is no additional action to be taken by taxpayers who have filed claims, unless taxpayers are concerned they may be in the high risk group. For those taxpayers that have concerns about their risk level or those who know that their claim may not be appropriate, the IRS still has its voluntary withdrawal program. It remains open to taxpayers whose claims are unprocessed.

Now is the time for taxpayers that are concerned about their claims to file the appropriate withdrawal. For those taxpayers that have already received a check, if it has not been cashed, the taxpayer can still file a withdrawal and the IRS will treat it as the same as if the claim has not been processed.

The IRS has already determined that approximately 12,000 business filed over 22,000 Employee Retention Credit claims that were improper and have already received payments on those claims. Those taxpayers will start receiving assessment notices shortly in the upcoming months. The IRS is currently considering reopening the ERC Voluntary Disclosure Program which closed this past March. However, if it does the settlement claims will not be as favorable as the first program.

Taxpayer should act now if they have concerns regarding their ERC claims.

If you have any questions about Employee Retention Credits or ERC payments, feel free to reach out to us for help.  Robb Longman’s extensive background in business law, corporate law, and tax law provides Mr. Longman with the ability to advise his clients on all tax controversy and audit issues including Employee Retention Credits. Mr. Longman has testified before the Maryland House of Delegates on tax matters and is currently the Secretary of the American Bar Association’s Tax Section . Mr. Longman regularly works with business and individual clients on all types of corporate and business matters to help them address their legal concerns.