Protect Your ERC Refund! ERC is on the Move – IRS Processing 400,000 Claims

Employee Retention Credit (ERC) processing is progressing since the moratorium began last year. If your company claimed the ERC and you have not received your refund, have received a denial notice, or received a letter initiating an audit, it is time to take proactive steps to ensure you receive your refund IF you have a proper claim.

Now is the time to revisit filing positions, current IRS stances, and supporting documentation to confirm the validity of your claim. If you received a notice or a letter regarding claims filed, it is imperative that you respond timely to preserve the right to a refund. Even if you have not received any correspondence pertaining to your ERC claim, we encourage you to revisit your ERC claim and follow up with the IRS regarding your claim status.

Revisiting your claim now is imperative as a recent news release from the IRS stated that processing is underway on 400,000 claims worth approximately $10 billion. The 400,000 claims include both eligible and ineligible claims. However, according to the IRS, the majority of the 400,000 claims are being processed for approval.

In additional ERC news, the Treasury Inspector General for Tax Administration (TIGTA) released a report on ERC claims indicating the IRS has implemented new identity theft filters which have identified 155,000 potentially erroneous ERC claims. These filters were not applied to previously issued ERC refunds. TIGTA applied the new filters during a recent audit and identified 997 potentially erroneous ERC claims that were already paid to taxpayers. IRS will re-examine these claims based on TIGTA’s recommendation.

TIGTA’s audit also found that for ERC claims through June 29, 2023, the IRS doubled the examination threshold and changed its referral criteria to deal with the influx of claims and expedite processing. As a result, the IRS processed 184,923 returns claiming $41.8 billion without a pre-refund examination. TIGTA recommended to the IRS that these claims should be considered for post-refund examination. The IRS partially agreed with this recommendation, citing resources and remaining time on open statutes.

The ERC was a much-needed lifeline for businesses during a time that created much uncertainty and difficulties to continue business as usual. While the moratorium has left many claimants unsure about their filings and potential refund, the recent news is encouraging about the future of ERC claims. The IRS has made the ERC reviews a top priority, including the identification of fraudulent claims. Additionally, the IRS has boosted the delivery of rejection letters in the last few months, citing a lack of government orders suspending business operations, that their records show there was not a significant reduction in gross receipts, or that the claimant was not a recovery start-up business.

As you consider your next step concerning your ERC claim, it is important to consult with an experienced professional who can objectively evaluate your claim, assist with proper documentation if it does not currently exist, and provide audit representation as needed. The audit professionals at CTI are well-versed in ERC and constantly in contact with the IRS, ensuring we can help our clients navigate this challenging landscape with the best information available.

If you would like to discuss your ERC claim with a tax incentives professional at CTI, please contact us.