Employee Retention Credit Moratorium Still in Place- IRS Provides an Update on Claim Review

The IRS released IR-2024-169 yesterday, summarizing its review of Employee Retention Credit (“ERC”) claims. Of the 1 million claims representing greater than $86 billion reviewed, the IRS determined:

• 10-20% of claims are in the highest-risk category, showing “clear signs of being erroneous”;
• 60-70% of highest risk claims show an “unacceptable level of risk” and will be subject to additional review; and
• 10-20% of claims are deemed “low risk” with no eligibility warning signs.

Payments to be issued this summer

For low-risk claims filed prior to September 2023, the IRS intends to begin processing more of these claims and expects the first payments to go out this summer. The IRS notes that processing will be slower due to the need for added scrutiny.

Moratorium still in effect

The news release also confirmed that the moratorium on processing ERC claims filed after September 14, 2023 is still in place due to concerns surrounding improper claims, with a substantial number of claims being filed long after the pandemic.

VDP and Claim Withdrawal

Additionally, the IRS is considering reopening the voluntary disclosure program (“VDP”) at a reduced rate. The VDP ended in March, and the IRS received more than 2,600 applications disclosing $1.09 billion.

Taxpayers may still pursue the claim withdrawal process for any ERC claim that has not yet been paid.

CTI’s Take

While this announcement provides some encouragement that pre-moratorium claims are still being reviewed and low-risk Taxpayers may see some payments soon, the IRS reinforces that ERC processing times will not return to previous levels. Taxpayers should continue to expect delays in processing and increased scrutiny of claims, especially if the claim was filed after the moratorium went into place.

If you have questions or concerns regarding your ERC claims, reach out to one of our tax specialists for assistance.