The Employee Retention Credit (ERC) program was initially established to help businesses retain employees during pandemic shutdowns. While the IRS continues to process and payout legitimate ERC claims, it has intensified its scrutiny due to the program becoming a target of aggressive and sometimes predatory marketing tactics. As a result, many businesses have been misled into filing improper claims, creating significant challenges for the IRS and legitimate companies. The agency's dual approach—scrutinizing improper claims, while ensuring legitimate businesses receive their credits—aims to clear the backlog and address challenges within the ERC program.

As the IRS moves forward, it will resume processing ERC claims filed between September 14, 2023, and January 31, 2024. Businesses may receive payments for certain quarters while other periods remain under review. So far, the IRS has identified 50,000 valid claims that are now being processed, with payments expected to start in September and continue in the following weeks. Additionally, the IRS has reminded businesses that they can file an administrative appeal if their ERC claims are denied.

As part of its ongoing efforts to battle fraudulent ERC claims, the IRS has reopened its voluntary disclosure program (VDP) until November 22, 2024, providing businesses with improper ERC claims a chance to correct them at a 15% discount, avoiding penalties and interest. The reopening offers a final opportunity for businesses to rectify their claims before facing compliance actions. This second VDP applies to tax periods in 2021, allowing participants to repay only 85% of the credits they received, but it does not cover ERC claims from tax periods in 2020.

IRS Commissioner Danny Werfel acknowledged the complexity of the ERC program, highlighting the difficulty in distinguishing valid claims from those fueled by aggressive marketing. The IRS urges businesses receiving ERC payments to recheck their eligibility with a trusted tax professional and consider using the VDP to resolve incorrect claims. A tax professional can help ensure your claims are accurate, guide you through appeals, and assist with the IRS's voluntary disclosure program to correct errors before facing penalties. With the IRS balancing the processing of legitimate claims while cracking down on improper ones, expert guidance can help your business secure the credits it deserves and avoid costly mistakes.

Talley’s professionals have spent literally hundreds of hours reviewing the law, regulations, and FAQs issued regarding the ERC almost daily, and we are happy to assist you in the process. Contact us today.