IRS Accelerates Processing of Employee Retention Credit Claims: $10 Billion in Eligible Claims Underway
Washington, D.C.
In a significant move to aid small businesses, the Internal Revenue Service (IRS) has announced substantial progress in processing Employee Retention Credit (ERC) claims. Currently, the agency is working on approximately 400,000 claims, totaling about $10 billion in eligible claims.
The Importance of ERC for Small Businesses
The ERC program was designed to provide financial relief to businesses during the COVID-19 pandemic by offering tax credits for retaining employees. However, the complexity and volume of claims have made this one of the most challenging tax administration tasks the IRS has faced. IRS Commissioner Danny Werfel emphasized the critical role of these payments in supporting small businesses and highlighted the agency’s efforts to expedite the processing of legitimate claims while preventing improper payments.
Addressing the Surge in Claims
A significant portion of ERC claims were submitted during a period of aggressive marketing by promoters, leading to a high rate of improper and ineligible claims. The IRS has been diligently working to sift through these claims to ensure only eligible claims are processed. Commissioner Werfel noted that recent efforts have substantially improved the separation of eligible claims from ineligible ones, allowing the IRS to refine its processing models further.
Consolidated Claim Process for Third-Party Payers
To streamline the processing, the IRS recently introduced a consolidated claim process for third-party payers. These third-party payers, responsible for handling clients’ payroll and tax reporting duties, can now resolve incorrect claims more efficiently. This process allows third-party payers to withdraw claims for ineligible clients while maintaining the claims of those who qualify.
Combating Fraud and Abuse
The ERC program’s expansion attracted aggressive and sometimes predatory marketing, with some promoters misrepresenting the credit as a grant or business stimulus payment. In response, the IRS has intensified audits and investigations to address fraud and abuse. Findings from a review announced in June confirmed a high rate of improper claims, prompting further action to ensure compliance.
Voluntary Disclosure Program
The IRS is also reminding businesses to review their ERC eligibility and consider participating in the second Employee Retention Credit Voluntary Disclosure Program (VDP), which remains open through November 22, 2024. This program allows businesses to correct improper payments at a 15% discount, avoiding future audits, penalties, and interest. This initiative aims to help businesses self-correct and repay erroneous claims driven by aggressive marketing.
Looking Ahead
As the IRS continues to navigate the complexities of the ERC program, businesses are encouraged to ensure their claims are accurate and compliant. The ongoing efforts to process valid claims and address improper ones are crucial to maintaining the integrity of this vital support mechanism for small businesses.
For full details on the Voluntary Disclosure Program and other compliance measures, refer to IRS Announcement 2024-30.
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This article aims to inform businesses about the latest updates on ERC processing and encourage compliance through the IRS’s available programs. Rockerbox remains committed to helping businesses navigate these changes and optimize their tax credit opportunities.