IRS Commissioner Danny Wuerffel speaks after taking the oath of office at IRS Headquarters in Washington on April 4, 2023.
Ting Sheng | Bloomberg | Getty Images
The IRS announced Thursday afternoon that it plans to deny billions of dollars’ worth of claims for pandemic-era tax breaks while working to process lower-risk returns.
The Employee Retention Credit (ERC), enacted to help small businesses during the COVID-19 pandemic, is worth thousands of dollars per eligible employee. However, the IRS announced in a news release that the agency stopped processing new applications in September amid a spike in “suspicious claims.”
The agency added that it would extend that suspension period.
After reviewing more than 1 million applications worth about $86 billion, the IRS said in a release that it has identified 10% to 20% of the highest-risk applications and expects to add “tens of thousands” in the coming weeks. announced that it would be rejected. Agency. The IRS said an additional 60% to 70% of claims with an “unacceptable level of risk” will undergo further investigation.
“We will use this information to deny billions of dollars in clearly improper claims, begin additional work to provide relief to taxpayers, and claim “We will make payments without raising any red flags.”
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During the ERC review period, the agency processed 28,000 claims (valued at $2.2 billion) received through September 2023 and closed more than 14,000 claims (valued at $1 billion), according to the announcement. Rejected.
Overall, ERC’s erroneous claims compliance efforts have totaled more than $2 billion since last fall, according to the IRS.
“This is one of the most complex credits the IRS has ever administered, and we continue to ask for taxpayer patience as we unravel this complex process,” Werfel said. “Ultimately, this period will help protect taxpayers from improper payments flooding the system and help get checks to those who are truly eligible.”
ERC withdrawal program still open
With more than 1.4 million ERC claims outstanding and many “questionable” returns, the IRS is urging taxpayers with pending ERC claims to consider the agency’s cancellation program.
If you haven’t received your payment during the tax period, you still have time to withdraw your claim. If you received a check but haven’t cashed or deposited it, you can use this program to return it.
If you qualify, the IRS will cancel your original ERC charge and no penalties or interest will apply.
Dean Zarb, national managing director of Alliant Group, previously told CNBC that “this is a mulligan moment” because ERC mistakes can be corrected before the IRS catches them.
