IRS Announces More ERC Refunds, But Should Taxpayers Cash the Checks?
By Anthony P. Daddino on October 11, 2024
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Anthony P. Daddino
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Yesterday the IRS announced the processing of 400,000 ERC claims, with the vast majority being approved and totaling $10 billion. The question is: should taxpayers cash the checks or assess their options?
For most taxpayers, the answer is yes -- to both – with the latter being key. Taxpayers should consult with their tax advisors regarding the merits of their ERC claims, especially those claims that relied on the government-order test as opposed to the gross-receipts test. For those readers looking for a refresher, taxpayers qualified for ERC provided they could show a specified reduction in gross receipts or that their business operations were fully or partially suspended due to a government COVID-related order. The latter test is facts-and-circumstances based, with the IRS seeking to impose through informal, non-authoritative guidance a myopic interpretation of an otherwise sweeping, relief-based statute. Of course, that is just the author’s “unbiased” take on the situation.
Regardless of the outcome of the risk assessment, the taxpayer will most likely proceed with cashing the ERC check. For those taxpayers confident of the merits of their ERC claims, cashing the check will officially start the 2-year statute of limitations whereby the IRS can seek to reclaim any alleged erroneous refund. [For those taxpayers thinking that the limitations period on their Q1 and Q2 ERC claims for 2021 expired in April 2025, sorry to disappoint you.] On the other hand, for those less-confident taxpayers, cashing the check still gives them the option to participate in the IRS’ voluntary disclosure program for ERC claims, which remains open until November 22, 2024. The program allows businesses to correct improper ERC refunds at a 15% discount and avoids future audits, penalties and interest. It is worth mentioning that in those circumstances where the taxpayer received a refund based on a highly-questionable ERC claim, due consideration should be given to returning the check and not cashing it.
Of course, not all 400,000 ERC claims are being allowed. For those being denied, taxpayers should consult with their tax advisors to consider when an appeal challenging the denial should be made to IRS Appeals. In the author’s experience, Appeals has been “mostly” independent in its handling of ERC disputes and remains a viable option for potential settlement. For the full text of the IRS’ release, click HERE.
If you or your client have any questions about ERC or other tax-related topic, feel free to contact me at (214) 749-2464 or adaddino@meadowscollier.com.
For most taxpayers, the answer is yes -- to both – with the latter being key. Taxpayers should consult with their tax advisors regarding the merits of their ERC claims, especially those claims that relied on the government-order test as opposed to the gross-receipts test. For those readers looking for a refresher, taxpayers qualified for ERC provided they could show a specified reduction in gross receipts or that their business operations were fully or partially suspended due to a government COVID-related order. The latter test is facts-and-circumstances based, with the IRS seeking to impose through informal, non-authoritative guidance a myopic interpretation of an otherwise sweeping, relief-based statute. Of course, that is just the author’s “unbiased” take on the situation.
Regardless of the outcome of the risk assessment, the taxpayer will most likely proceed with cashing the ERC check. For those taxpayers confident of the merits of their ERC claims, cashing the check will officially start the 2-year statute of limitations whereby the IRS can seek to reclaim any alleged erroneous refund. [For those taxpayers thinking that the limitations period on their Q1 and Q2 ERC claims for 2021 expired in April 2025, sorry to disappoint you.] On the other hand, for those less-confident taxpayers, cashing the check still gives them the option to participate in the IRS’ voluntary disclosure program for ERC claims, which remains open until November 22, 2024. The program allows businesses to correct improper ERC refunds at a 15% discount and avoids future audits, penalties and interest. It is worth mentioning that in those circumstances where the taxpayer received a refund based on a highly-questionable ERC claim, due consideration should be given to returning the check and not cashing it.
Of course, not all 400,000 ERC claims are being allowed. For those being denied, taxpayers should consult with their tax advisors to consider when an appeal challenging the denial should be made to IRS Appeals. In the author’s experience, Appeals has been “mostly” independent in its handling of ERC disputes and remains a viable option for potential settlement. For the full text of the IRS’ release, click HERE.
If you or your client have any questions about ERC or other tax-related topic, feel free to contact me at (214) 749-2464 or adaddino@meadowscollier.com.
