IRS Enters Next Stage of Employee Retention Credit Work
The IRS is intensifying its efforts to scrutinize claims for the Employee Retention Credit (ERC), as recent evaluations reveal a high likelihood of improper claims. The review showed that a significant portion of ERC submissions are potentially ineligible, prompting the IRS to implement more rigorous examination protocols. This action aims to prevent misuse of the credit, ensuring it benefits those genuinely affected by the COVID-19 pandemic. Taxpayers and tax professionals are advised to be diligent and compliant with eligibility criteria to avoid penalties and interest on disallowed claims.
No additional action needed by taxpayers at this time; await further notification from the IRS
The IRS cautioned taxpayers who filed ERC claims that the process will take time, and the agency warned that processing speeds will not return to levels that occurred last summer. Taxpayers with claims do not need to take any action at this point, and they should await further notification from the IRS. The agency emphasized those with ERC claims should not call IRS toll-free lines because additional information is generally not available on these claims as processing work continues. They also cautioned taxpayers to be wary of promoters using today’s announcement as a springboard to attract more clients to file ERC claims.
Help for businesses with eligibility questions and those misled by promoters
Some promoters told taxpayers every employer qualifies for ERC. The IRS and the tax professional community emphasize that this is not true. Eligibility depends on specific facts and circumstances. The IRS has dozens of resources to help people learn about and check ERC eligibility, and businesses can also consult their trusted tax professional. Key IRS materials to help show taxpayers if they have a risky ERC claim include:
- ERC Eligibility Checklist,which has an interactive version and a printable PDF guide includes cautions about common areas of misinformation and links to facts and examples.
- 7 warning signs ERC claims may be incorrectoutlines tactics that unscrupulous promoters have used and why their points are wrong.
- Frequently asked questions about the Employee Retention Creditincludes eligibility rules, definitions, examples and more.
For more details, visit the IRS newsroom.
