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Taxpayer Advocate Says the IRS Processing of ERC Claims has Slowed to a Dribble

By Joel N. Crouch on January 11, 2024
Readers will recall that in response to growing concerns of the IRS, tax professionals and others regarding the number of fraudulent ERC claims, on September 14, 2023 the IRS announced a moratorium on processing ERC claims filed after September 14th until at least December 31, 2023. Although the announcement also said the time to process pending claims would increase from 90 days to 180 days, we all assumed the IRS would continue processing claims filed before September 14, 2023.

According to the National Taxpayer Advocate’s January 10th Annual Report to Congress, that assumption was incorrect. According to the advocate’s report, “though it indicated it would continue to process ERC claims filed before the moratorium at a slower pace due to stricter compliance reviews, the IRS has all but ceased processing as taxpayers continue to file new ERC claims at a significant rate”. The report says that the IRS has a backlog of 1 million ERC claims as of early December and that from mid-August through mid-October, an average of 45,000 ERC claims were filed each week. However, the IRS was only processing 150 ERC claims each week. The report recognizes the difficult situation the IRS is in as it attempts to balance stopping fraudulent ERC claims against the financial needs of businesses that filed legitimate ERC claims.

In a September 21st blog post, "The Squeaky Wheel Gets the Grease? Employers Should Consider Filing Lawsuits to Obtain ERC Refunds”, we discussed an option an employer has if an ERC claim is not being timely processed by the IRS.

The Advocate’s annual report was released on the same day that IRS Commissioner Danny Werfel met with members of the Senate Finance Committee asking for legislative fixes to combat ERC fraud, including barring contingency fees for ERC claims, penalties for ERC preparers and more time to pursue ineligible claims.

For questions regarding this blog post or any other civil or criminal tax related matter, please feel free to contact me at jcrouch@meadowscollier.com.