The IRS’s recent recommencement of employee retention credit (ERC) claim processing is a positive development for small businesses waiting for their claims to be processed and refund checks issued. However, there is still a significant backlog of ERC claims, as noted by the National Taxpayer Advocate in its midyear report to Congress.
The IRS announced on August 8 that businesses with ERC claims filed between September 14, 2023, and January 31, 2024, will begin seeing payments or denials. It plans to issue payments for 50,000 low-risk claims this month and another block of low-risk claims later in the year. Taxpayers should review their claims, especially given the newly reopened ERC voluntary disclosure program, which could benefit those who haven’t yet filed.
The IRS has cautioned that ERC processing speeds will be slower due to more thorough reviews to prevent fraud. Taxpayers with pending claims do not need to take further action and should await notification from the IRS. It is crucial to be vigilant against improperly issued denial letters, and there are options for administrative appeals or refund litigation in appropriate courts if claims can be substantiated.
Additionally, the IRS is increasing ERC audits and pursuing investigations for fraud. Taxpayers who find their claims were filed improperly can take remedial measures, including repaying 85% of wrongly received funds without penalties, as part of the voluntary disclosure program. Taxpayers who need to amend their ERC claims can file IRS Form 941-X to reflect accurate amounts.
Unless Congress sunsets the ERC early, claims can be filed based on wages paid during 2021 until April 15, 2025. The ERC remains a crucial opportunity for businesses aiming to increase liquidity during these challenging times.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
For the full article by Jake W. Kacynski at Howard & Howard, visit Bloomberg Tax.