Congress members are pressing the Internal Revenue Service (IRS) for explanations regarding the backlog of Employee Retention Credit (ERC) claims. This comes shortly after the IRS instituted a moratorium on new claims due to a surge in dubious applications. In mid-September, IRS Commissioner Daniel Werfel announced a halt on new ERC claim processing for the remainder of the year following an inundation of claims in 2023. A significant portion of these claims is believed to originate from "ERC mills," shadowy entities promoting pandemic tax benefits by submitting revised tax returns. Notably, these credits were intended for employers who kept their workforce from 2020 until the third quarter of 2021.

House Ways and Means Committee chairman Jason Smith, along with Oversight Subcommittee chairman David Schweikert, penned a letter to Werfel inquiring about the IRS's strategies to manage fraud during the moratorium and the legislative measures they recommend to Congress for curbing fraud within the program. They also sought clarity on the IRS's projected timeline for processing existing ERC claims and the data that prompted the moratorium. Further, they expressed interest in the cumulative refund amount processed thus far and the IRS's timeline for clearing the current backlog.

Smith and Schweikert said, "The recent moratorium, though intended to shield taxpayers from scams, might potentially prolong wait times, exacerbate the already extensive backlog, and hinder legitimate claimants from acquiring their dues." They stressed the urgency to streamline the verification process for potentially fraudulent claims and enhance overall efficiency. They emphasized the IRS's lack of collaboration with Congress to address the challenges and develop legislative solutions. Adding to their concerns, Smith and Schweikert highlighted the inconsistency in the IRS's statements. While the IRS announced the clearance of valid claims' backlog in late July, their website indicated around 500,000 Forms 941-X awaiting processing. By mid-August 2023, this number had risen to approximately 521,000.

Talley’s professionals have spent literally hundreds of hours reviewing the law, regulations, and FAQs issued on an almost daily basis regarding the ERC and PPP, and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or refund process. Contact us today.