The Internal Revenue Service (IRS) has officially announced its advancement in processing Employee Retention Credit (ERC) claims as of August 8, 2024. The IRS will commence the processing of ERC claims filed between September 14, 2023, and January 31, 2024. (IR 2024-203, 8/8/2024)
Background on ERC
The Employee Retention Credit (ERC) was designed to support businesses in retaining their workforce during the pandemic-induced economic disruptions. However, the program faced challenges as it became the focus of aggressive marketing by various promoters, continuing even after the pandemic’s peak. This surge in promotion led to a substantial increase in ERC claims, many of which were flagged as potentially improper.
Current IRS Actions
To address the influx of questionable claims, the IRS imposed a moratorium on processing ERC claims submitted after September 14, 2023. This pause was intended to allow the agency to review and identify improper claims among those already filed. As part of this effort, the IRS recently issued 28,000 disallowance letters to businesses, rejecting claims deemed improper. This action is projected to prevent approximately $5 billion in erroneous payments.
Appeal Process
Businesses that receive denial letters from the IRS can appeal the decision. Even if the denial letter does not specify appeal rights, businesses should follow the instructions provided to respond to the address listed on the letter. For further guidance on the appeals process, the IRS.gov website offers detailed information through the Independent Office of Appeals.
Processing of Valid Claims
In positive developments, the IRS has identified 50,000 valid ERC claims and is prioritizing their processing. Payments for these claims are expected to begin in September, with additional payments scheduled in the weeks that follow. The IRS also anticipates processing a further batch of low-risk claims in the fall.
Ongoing Review
As the IRS continues its review process, businesses should be aware that they may receive payments for certain quarters while the IRS continues to assess eligibility for other periods. This phased approach aims to ensure that valid claims are promptly addressed while maintaining scrutiny over potentially improper submissions.
For further assistance or detailed guidance on resolving ERC claim issues, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com