Executive summary

The IRS has finished a detailed review of Employee Retention Credit claims and will use that data to strategically process pending claims. The September 2023 moratorium will remain in place while lower-risk claims will continue to be slowly processed, with payments expected to be issued this summer. The IRS continues to urge filers to have a trusted tax professional review their claim for validity. The IRS also continues to advocate for Congress to extend the time the IRS has to examine claims and stop new claims from being filed.

On June 20, 2024, the IRS issued news release IR-2024-169 announcing the next stage of Employee Retention Credit (ERC) processing. The IRS conducted a detailed review of more than one million ERC claims representing more than $86 billion filed. As a result of this detailed review, the IRS determined a high number of these claims have an unacceptable level of risk. The IRS now moves into the next phase of processing wherein they will deny outright those claims with the highest risk, or what the IRS has described as having “clear signs” of being erroneous claims. 60-70% of the claims which the IRS determined have an unacceptable level of risk will be subject to additional review. The lowest risk claims will be processed, however the IRS warns the processing work will continue at a slow pace, and starting with the oldest claims. Payments on claims can be expected starting this summer, but the IRS is emphasizing that processing will continue to be slow due to increased scrutiny.

ERC processing moratorium on post-September 2023 claims remains.

While some claims will be processed, the September 2023 moratorium on processing new ERC claims continues with no clear end in sight. For those claimants who believe their claims may be erroneous, the ERC withdrawal program is still available. The ERC Voluntary Disclosure Program has closed, but the IRS provided that it may reopen in the future, with less favorable terms.

Extended period for review continues to be a possibility.

The IRS news release also indicated that the IRS continues to advocate for Congress to pass legislation ending additional ERC claims as well as extend the statute of limitations on assessment on these claims. Legislation proposed at the beginning of 2024 included a six-year period for IRS review from the date of the refund check, as opposed to the standard three years from the date of the claim. This additional time would be a boon to the IRS who has thousands of claims to review with a very short time left to do it – the statute of limitation on assessment for 2020 periods expired in April 2024 and the period for 2021 claims will expire in April 2025.

Contact a trusted tax advisor to review your claim or if you receive IRS correspondence.

As the IRS continues to process and scrutinize these claims, notice of IRS examination or other types of correspondence seeking information are likely. IRS correspondence is likely to have a short turnaround time for response. Reach out to a trusted tax professional if you receive IRS correspondence and need assistance responding. The IRS also encourages taxpayers to reach out to a trusted tax professional to review ERC claims for validity.

This article was written by Marissa Lenius, Karen Field , Anne Bushman, Alina Solodchikova and originally appeared on 2024-06-21. Reprinted with permission from RSM US LLP.
© 2024 RSM US LLP. All rights reserved. https://rsmus.com/insights/tax-alerts/2024/irs-announces-new-phase-of-erc-processing.html

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