IRS Increasing Audits on ERC Claims

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To help businesses and their employees during the pandemic, the IRS created the Employee Retention Credit (ERC) which is a “refundable tax credit” for employers who kept their employees paid despite lockdowns and decreased revenue. Unfortunately, since the program’s implementation, the IRS has received countless “bogus claims” and is now trying to hold those who attempt to get money from these fraudulent claims accountable.

Despite extending the moratorium on new claims processing that was first imposed in 2023, the IRS continues to receive thousands of ERC claims per week. Due to this large amount, it is “ramping up audits and criminal investigations of suspected fraud”. To combat fraudulent claims, over “460 criminal cases” have been opened, and the IRS has sent over “280,000 rejection letters” to high risk applications.

Despite all these setbacks, the IRS has reopened processing of some low risk claims filed during the moratorium. The IRS will “start processing ERC claims filed between Sept. 14, 2023, and Jan. 31, 2024”, meaning, if you filed your claim during the moratorium and were not expecting to be processed any time soon, you may see a verdict in the coming months. With so much fraud and risk associated with the ERC, Congress has made attempts to end the program entirely; however, it ultimately did not pass the Senate.

Although taking advantage of the ERC claim can help with the multitude of difficulties faced during the COVID-19 pandemic, you want to ensure that you are filing your ERC claim correctly to avoid IRS scrutiny. If you need help with understanding the ERC and ensuring you will not get audited, look no further than XQ CPA. Our experienced tax experts are here to assist in any of your business needs.

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Sources:

https://www.irs.gov/newsroom/irs-moves-forward-with-employee-retention-credit-claims-agency-accelerates-work-on-complex-credit-as-more-payments-move-into-processing-vigilance-monitoring-continues-on-potentially-improper-claims