The IRS has announced a significant step to deny tens of thousands of Employee Retention Credit (ERC) claims deemed as high-risk and improper. This move is part of a broader effort to ensure that taxpayer funds are directed appropriately and to curb potential misuse. Such proactive measures by the IRS highlight its commitment to maintaining the integrity of the ERC program.
Earlier investigations into ERC claims have revealed substantial concerns regarding the legitimacy of numerous submissions. Previous audits indicated that a high percentage of claims did not meet program guidelines. These findings prompted the IRS to adopt stricter review processes. The current decision to deny high-risk claims is consistent with these prior efforts to prevent fraud and improper payouts.
Initiatives from past years also show a pattern of increased scrutiny on relief programs. For example, during the pandemic, several relief initiatives faced similar challenges, necessitating stringent measures to ensure only eligible claims were processed. The IRS’s ongoing efforts reflect a continued evolution of strategies to protect public funds.
High-Risk ERC Claims
The IRS reviewed over one million ERC claims and found that 10% to 20% of these claims were in the highest risk category. These claims clearly fell outside the program guidelines. Consequently, the IRS will deny these claims in the upcoming weeks, preventing billions of dollars in improper payouts.
Moderate and Low-Risk Claims
An additional 60% to 70% of ERC claims were identified as having an unacceptable level of risk. For these claims, the IRS plans to conduct further analysis to gather more information before making a final decision. Meanwhile, the IRS identified 10% to 20% of claims as low-risk, presenting no eligibility warning signs. These low-risk claims will be processed judiciously to support small businesses awaiting legitimate claims.
- IRS aims to protect taxpayer funds from misuse.
- High-risk claims will be denied to prevent improper payouts.
- Further analysis will be conducted for moderate-risk claims.
The IRS’s move to deny high-risk ERC claims is a critical step towards ensuring that relief funds are used appropriately. The agency’s review process revealed widespread concerns about the legitimacy of many claims, underscoring the need for stricter oversight. By focusing on high-risk and moderate-risk claims, the IRS aims to balance the need for thorough scrutiny with the necessity to support businesses awaiting legitimate claims.
Implementing a moratorium on new ERC claims in September 2023 and launching a Voluntary Disclosure Program in December 2023 were strategic measures to address the growing concerns about ineligible claims. These steps reflect the IRS’s adaptive approach to evolving challenges in managing relief programs. By continually refining its processes, the IRS enhances its ability to safeguard public funds and ensure that assistance reaches those truly in need. These initiatives underscore the importance of vigilance and adaptability in administering large-scale relief programs.
