On June 20, 2024, the IRS announced its intention to begin processing low-risk claims of the Employee Retention Credit (ERC) while also denying “tens of thousands of improper high-risk Employee Retention Credit claims.”
The announcement details the IRS’ efforts in analyzing more than one million ERC claims. According to the results of this analysis, between 10% to 20% of ERC claims are considered to be of “highest risk,” containing red flags resulting in impending claim denials.
The analysis identified between 60% to 70% of claims containing an “unacceptable” level of risk. These claims will undergo additional scrutiny and information gathering in an effort to “[speed] resolution of valid claims while protecting against improper payments,” according to the announcement.
The remaining 10% to 20% of claims are considered low risk. The IRS will begin processing more of these claims with payments expected to resume later this summer. For the time being, the IRS plans to process the oldest claims first and only claims submitted before the moratorium on processing new claims, which was initiated last September. The process will be slower and performed more “judiciously,” according to the IRS.
While the IRS is not subject to a specific time period to process refund claims, there may be a few steps that may be taken to help legitimate claims be processed more expeditiously.
Options
A taxpayer (or an authorized representative indicated on Form 2848, Power of Attorney and Declaration of Representative) may call the IRS to determine the status of the claim. On occasion, it has been discovered that the IRS does not have record of the claim or that the claim has been flagged for examination. Verifying the status of the claim can help taxpayers take immediate action if there is an issue.
A taxpayer may contact the Taxpayer Advocate Service, which may be able to help prioritize the claim with the IRS especially if undue hardship resulting from the delay can be demonstrated. In addition, the taxpayer may take up the issue with their congressperson; asking them to contact the IRS on their behalf may expedite processing.
For claims that have not been processed but were filed at least six months ago, a taxpayer may consider filing a refund claim in court. Taxpayers should be prepared as claims for refund must include “facts sufficient” enough to establish the ground the refund claim is based upon and may be dismissed if a taxpayer “fails to adequately state a basis for relief in a refund claim,” according to regulations. While this option is more time-consuming and costly, it does present a strong case to the IRS that a taxpayer’s claim is likely legitimate if they are willing to present their case before a court.
The IRS advises taxpayers with pending claims to not rely on the advice of “promoters” that have caused many of these issues in the first place but instead reach out to a “legitimate tax professional.” For assistance or additional information on these options, please contact a professional at Forvis Mazars.