What’s Next for the Employee Retention Credit?
The IRS is signaling new progress on the agency’s efforts to process Employee Retention Credit claims and identify fraudulent applications.
It comes as federal lawmakers are putting pressure on the agency, examining the challenges businesses and tax preparers have faced with ERC.
During the IRS Nationwide Tax Forum at the end of July, commissioner Danny Werfel said the agency has shifted its efforts to increased scrutiny on false claims after successfully clearing the backlog of valid claims.
The ERC program was designed as a refundable tax credit to help businesses who continued to pay employees during the pandemic despite shutdowns.
The period of eligibility for those businesses impacted is between March 13, 2020 and Dec. 31, 2021.
Claims Process
The IRS received more than 2.5 million claims since the program was enacted, but with the complexity of the claims, growing falsities made timely processing difficult.
Current law gives businesses until April 15, 2025 to file claims for the credit, a future date Werfel said is concerning.
The period of eligibility for those businesses impacted is between March 13, 2020 and Dec. 31, 2021.
“The further we get from the pandemic, we believe the percentage of legitimate claims coming in is declining,” said Werfel.
“Instead, we continue to see more and more questionable claims coming in following the onslaught of misleading marketing from promoters pushing businesses to apply.”
Future Unknown
The IRS has issued a number of warnings over the past year as false claims have risen significantly.
Officials said aggressive marketers are scamming businesses, making them think they are eligible when they are not.
“The amount of misleading marketing around this credit is staggering, and it is creating an array of problems for tax professionals and the IRS while adding risk for businesses improperly claiming the credit,” Werfel said.
He said he is looking to Congress to help ease the situation, possibly ending the date businesses can claim the credit.
For now, businesses are encouraged to stay vigilant as business leaders continue to report advertising from scammers.
Businesses can report ERC abuse by completing Form 14242, Report Suspected Abusive Tax Promotions or Preparers.
The form and any supporting materials can be sent to the IRS Lead Development Center in the Office of Promoter Investigations.
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