ERC All the Time: Another Update from IRS on Enforcement
By Anthony P. Daddino on August 9, 2024
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Anthony P. Daddino
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On August 8, 2024, the IRS released another update on its ERC efforts – the second update in two weeks. Beyond confirming the IRS’ commitment to ferreting out abuse and reminding taxpayers of various options to remediate questionable ERC claims, the IRS offered a few interesting data points and meaningful developments.
- In recent weeks, the IRS has sent out 28,000 disallowance letters to businesses whose claims showed a high risk of being incorrect. The IRS estimates that these disallowances will prevent up to $5 billion in improper payments.
- To date, the IRS has initiated thousands of civil examinations and 460 criminal cases.
- On a more positive note, the IRS has identified 50,000 valid ERC claims and is quickly moving them into the pipeline for payment processing. The IRS projects payments will begin in September with additional payments going out in subsequent weeks. The IRS anticipates adding another large block of additional low-risk claims for processing and payment in the fall.
- The IRS has lifted the previous moratorium on ERC claims. The IRS will now start "judiciously” processing claims filed between Sept. 14, 2023, and Jan. 31, 2024. The IRS will not work the claims in date of receipt; rather the IRS will focus on the highest and lowest risk claims at the top and bottom end of the spectrum.
Regarding the disallowed ERC claims, recall that the IRS made determinations on these claims based on data analytics and without any additional information from the taxpayer. The IRS has acknowledged concerns raised by tax professionals about potential errors, but the IRS believes that “90% of disallowance notices were validly issued.” The IRS did not offer any support for this statement, which strikes me as thin and self-serving. Fortunately, the disallowance letters bear appeal rights – allowing the taxpayers to file an administrative appeal and seek an audience with IRS Appeals. Based on my experiences thus far, IRS Appeals has offered a listening ear to taxpayers and properly recognized the hazards of litigation associated with the IRS’ overly rigid stance on ERC claims. Taxpayers who receive a disallowance letter would be well advised to seek counsel to discuss their options and the merits of an appeal.
If you or your client received an ERC disallowance letter, or if have any questions about ERC or other tax-related topic, feel free to contact me at (214) 749-2464 or adaddino@meadowscollier.com.
