Skip to main content

Site Navigation

Site Search

global Tax

ERC Claims Under Scrutiny: IRS Set To Reject Thousands of Claims

July 09, 2024

The IRS has announced it expects to deny thousands of improper high-risk ERC claims. This is part of their wider efforts to process lower risk claims to assist eligible taxpayers. Read on.

In efforts to protect taxpayers and small businesses, the IRS has conducted a detailed review of ERC claims and has announced plans to deny tens of thousands of improper ERC claims. Here’s what you should know.

ERC- Background

Check out our ERC Insights page for more information on the ERC and how to qualify for the credit.

The credit was intended to help businesses retain employees during pandemic shutdowns but quickly attracted scammers. For quite some time now, the IRS has been inundated with false claims for the credit. Many employers were pushed to submit claims even though they are ineligible. This led to a moratorium on the processing of new ERC claims as of September 14, 2023.

What’s new?

After a review of 1 million ERC claims (representing $86 billion in claims filed), the IRS has discovered that about 10-20% of those filings show clear signs of being erroneous claims. The IRS has deemed this the highest-risk group, and these will be denied in the coming weeks.

An additional 60-70% of claims show an “unacceptable level of risk” and will undergo additional IRS analysis.

What about legitimate claims?

Many small businesses continue to wait on legitimate claims for the ERC (received prior to September 2023’s moratorium), so the IRS is also taking more action to start processing these claims. The first payments are expected to go out later this summer.

The oldest claims will be processed first and no claims received after the moratorium date will be processed as of now.

What actions should taxpayers take?

If you’re waiting on a legitimate claim, no action is needed at this time and the IRS has made it clear that this process will take extended time.

What if you suspect your claim to be improper?

The IRS is urging businesses with unprocessed ERC claims to use the special Withdrawal Program to avoid compliance issues. Businesses should quickly request claim withdrawal if the ERC payment hasn't been processed. Taxpayers who received a check but haven't cashed it can also return it. The IRS will treat these claims as if they were never filed, with no interest or penalties.

June Landry CTA

Stay informed. Get all the latest news delivered straight to your inbox.

Also in Tax Blog

up arrow Scroll to Top