By Natalie Grumhaus
The IRS officially broke its silence this week on the status of the millions of outstanding ERC claims. While the old adage of “no news is good news” may still ring true for some, having a little clarity on the process going forward is a welcome change. The moratorium on new claims is still in effect until the IRS and Congress decide if legislative action may be necessary before new claims are admitted.
However, the IRS did process 28,000 older claims throughout the moratorium period, disallowing 14,000 more, and more checks are promised to go out this summer. Working with clients here, we have already had success this spring in resolving some outstanding ERC claims by working with the Taxpayer Advocate Service, who informed us that large batches of claims were being processed and reviewed at the beginning of every month, starting back in March.
IRS Commissioner Danny Werfel stated in the IRS News Release this week that “the completion of this review [period] provided the IRS with new insight into risky Employee Retention Credit activity and confirmed widespread concerns about a large number of improper claims. We will now use this information to deny billions of dollars in clearly improper claims and begin additional work to issue payments to help taxpayers without any red flags on their claims. This is one of the most complex credits the IRS has administered, and we continue to ask taxpayers for patience as we unravel this complex process. Ultimately, this period will help us protect taxpayers against improper payouts that flooded the system and get checks to those truly eligible.”
The IRS does anticipate that a very high number of the pending ERC claims will be considered “high risk” and likely disallowed: 10-20% being erroneous or fraudulent claims and 60-70% being an “unacceptable level of risk.” While the IRS did not explicitly say that it plans to audit all of these risky claims, the implication was clear in the release to expect such a number of audits. The IRS only predicted that 10-20% of pending claims were likely to be low risk and valid claims, but it promised that payments for many of these would be going out in the next few months.
Our advice to those who have already filed claims is to do nothing – even if you find that your claim is marked as being under review, that may not mean that a full audit has been triggered. Many of the lower risk claims may be reviewed internally and processed without any additional information or work necessary. If you are in need of funds that have not been disbursed yet and filed your ERC claims through us, please contact us and we can help you work with the Taxpayer Advocate Service to see if anything can be done to expedite your claims.
If you have not filed ERC claims yet, the period for 2021 claims is still open until April 15, 2025. We would be happy to help you determine your eligibility. On the other hand, if you filed with another provider and realize now that you may not be eligible, we can help you file paperwork to withdraw those claims and avoid any potential penalties.
At Tri-Merit, we know that our strength is in the quality of our work and our customer service ethic. If you filed an ERC claim with us and it is challenged or disallowed, we will do our best to defend you in these disputes with the IRS and ensure you get the money you need to help your business succeed.