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ERC Update: July 2024
For those who thought the Employee Retention Credit was thrown to the wayside, we have a major update for you. Last September the IRS announced it was halting processing all new ERC claims due to the number of submitted claims outside the scope of Congressional guidelines. But on June 20th, after coming under fire from Congress, the IRS announced it would begin processing some of the older claims. The IRS is not formally lifting the moratorium on newer claims. These newer claims cover about 1 million companies representing more than $86 million in revenue. The IRS lumps roughly 10 to 20 percent of these claims as high-risk, those who clearly fall out of the guidelines set by Congress and will be rejected. Another 60 to 70 percent of these claims also fall short of the guidelines, and the IRS will be conducting extra exams and streamlining their review process to help weed out the illegitimate claims so legitimate claims can be processed. This leaves 10 to 20 percent of claims of legitimate claims.
The IRS is extremely concerned about the last 10 to 20 percent of claims which are from small business with legitimate claims. IRS Commissioner Danny Werfel held a press conference on June 20th commenting, “They have been victims of the marketing barrage that gummed up the processing with questionable claims. For those with legitimate claims, this review helps the IRS with a path forward.” He went on to say that claims with no eligibility warning signs that were submitted before last September will be the ones most likely to be processed and paid, possibly by late summer. The IRS has set forth a plan to start with the oldest claims first and work their way up as efficiently as possible so business with legitimate claims can receive the help needed when they first filed their claims.
To a taxpayer still waiting for an ERC claim to be processed, the IRS says be patient. Taxpayers who have already submitted claims can do nothing but wait for further notification from the IRS. Commissioner Werfel said, “We emphasize those with ERC claims should not call the IRS toll-free lines or their tax professionals about processing times. Additional information is generally not available on claims as our processing work continues.” Werfel also stated: “We deeply appreciate your patience, but there is too much risk for us to return processing speeds to levels that occurred during the height of the pandemic. These complex claims take time, and we remain deeply concerned about how many taxpayers may have been misled and deluded by promoters into thinking they’re eligible for a big payday. But many of these claims are simple not under the law.” The commissioner urges taxpayers with pending claims to review the ERC guidelines checklist on IRS.gov and talk to a legitimate tax professional to see if they qualify. If a taxpayer discovers that they are not eligible for the credit, the IRS urges taxpayers to use a special IRS withdrawal program located on their website. This will help clear the pathway for legitimate claims. Anyone still considering applying for these credits should meet with a trusted tax professional. HHM is can answer all your ERC concerns and provide insight into your eligibility for ERC credits.
Helpful Links:
https://www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim