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IRS Announces New Phase of ERC Processing

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Executive Summary

The IRS has completed a detailed review of Employee Retention Credit (ERC) claims and will use this data to strategically process pending claims. The September 2023 moratorium will remain in place, with lower-risk claims continuing to be slowly processed. Payments are expected to be issued this summer. The IRS continues to advocate for Congress to extend the time the IRS has to examine claims and stop new claims from being filed.

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On June 20, 2024, the IRS issued news release IR-2024-169 announcing the next stage of ERC processing. The IRS conducted a detailed review of more than one million ERC claims, representing more than $86 billion. As a result of this detailed review, the IRS determined a high number of these claims have an unacceptable level of risk. The IRS will now deny outright those claims with the highest risk, or what the IRS has described as having “clear signs” of being erroneous claims. Sixty to seventy percent of the claims deemed to have an unacceptable level of risk will be subject to additional review. The lowest-risk claims will be processed, but the IRS warns that processing will continue at a slow pace, starting with the oldest claims. Payments on claims can be expected starting this summer, but the IRS emphasizes that processing will continue to be slow due to increased scrutiny.

ERC Processing Moratorium on Post-September 2023 Claims Remains

While certain claims will move forward, the September 2023 moratorium on processing new ERC claims continues indefinitely. Claimants who suspect their claims may be erroneous can still utilize the ERC Withdrawal Program. Although the ERC Voluntary Disclosure Program has closed, the IRS has noted it may reopen in the future under less favorable terms.

Extended Period for Review Continues to be a Possibility

The IRS news release also highlighted the agency’s continued push for Congress to pass legislation that would halt new ERC claims and extend the statute of limitations for reviewing these claims. Proposed legislation from early 2024 suggests a six-year review period from the date of the refund check, rather than the standard three years from the date of the claim. This extension would significantly benefit the IRS, which is faced with thousands of claims to review within a limited timeframe – the statute of limitations for 2020 claims expired in April 2024, and the period for 2021 claims will expire in April 2025.

Contact Us 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 us if you receive IRS correspondence and need assistance responding.

The IRS advised that taxpayers and tax professionals should not call the IRS toll-free lines about the status of an ERC claim because IRS agents staffing these lines will not have any information concerning the status of these claims.

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