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IRS Says: Enough With The Employee Retention Credit Claims

Facing a tsunami of Employee Retention Credit (ERC) refund claims, the IRS is trying different approaches to stop perceived widespread fraud. The IRS first released a string of statements warning small businesses about ERC mills pushing false ERC claims. These ERC mills are pushing businesses to apply for tax refunds based on the ERC regardless of whether a business qualifies. The ERC mills then take large fees for pushing even meritless claims. But the IRS’ repeated warnings apparently had little effect. By September 2023, the IRS had received more than 3.6 million ERC claims in total. Yet the IRS contended that claims continued to stream in, even though the ERC covered periods in 2020 and 2021. Believing that the continuing flow of claims were indicative of widespread fraud, the IRS then took additional steps. The IRS announced that it would stop processing any ERC claims filed on or after September 14, 2023. Claims coming in on or after that date would not be processed until, at the earliest, 2024. The IRS’ stated reason for implementing this pause was to give it time to establish (1) a withdrawal program for pending ERC claims and (2) a repayment program for businesses that received ERC, but were not entitled to such credits. And perhaps an unstated reason was to direct greater enforcement resources at pursuing bad actors in the ERC space – including the individual businesses with pending or finalized claims, and, especially, the ERC mills responsible for large numbers of claims.

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