The IRS has resumed processing new Employee Retention Credit (ERC) claims after a nearly one-year pause. This moratorium, announced in September 2023, was intended to address the overwhelming number of improper claims submitted by businesses influenced by promoters encouraging ineligible filings. During the pause, the IRS focused on reviewing existing claims and tightening oversight.
As of now, the IRS is processing claims filed between September 14, 2023, and January 31, 2024. To expedite this process, it is prioritizing claims deemed low-risk for errors while simultaneously increasing the issuance of denial letters for claims found to be improper.
Increased Scrutiny and Risk of Denied Claims
With the large volume of claims being processed, legitimate ERC claims may face a higher likelihood of denial. The IRS acknowledges that while many denied claims stem from businesses that were never eligible for the credit, some valid claims might also be rejected.
If your business receives a denial notice and you believe your claim is legitimate, it’s important to act quickly. The IRS allows you to appeal a denied claim, but the window to request reconsideration is just 30 days from the date on the denial letter.
Options for Withdrawing Improper ERC Claims
If your business filed an ERC claim in error, there’s still an opportunity to withdraw it, provided the IRS has not yet processed the claim or issued a refund. Claims withdrawn before processing are treated as if they were never made, with no penalties incurred. However, if a refund has already been issued, the option to withdraw is no longer available.
In recent months, the IRS has offered amnesty programs allowing businesses to repay 80–85% of funds received through improper ERC claims. Unfortunately, the most recent amnesty program closed on November 22, 2023, and it remains unclear if similar programs will be offered in the future.
What Businesses Should Do Next
- Review Eligibility: Ensure your business meets the criteria for claiming the ERC to avoid unnecessary penalties or complications.
- Respond Quickly: If you receive a denial letter for a legitimate claim, file your appeal within 30 days.
- Act Proactively: If you’ve filed an improper claim but have not yet received funds, consider withdrawing it immediately to avoid penalties.
Navigating the complexities of the ERC can be challenging. If you need assistance understanding your eligibility, appealing a denial, or withdrawing a claim, Gleason Tax Advisory is here to help. Contact us today for expert guidance.
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