June 21, 2024

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IRS stops processing employee retention credit

IRS stops processing employee retention credit

  • IRS Commissioner Danny Werfel ordered the agency to immediately stop processing new claims for the employee retention credit.
  • The ERC, created to support small businesses during the COVID-19 pandemic, can be worth thousands of dollars per employee.
  • This sparked a flood of specialist companies that falsely promised companies that they would qualify for the complex tax break.

IRS Commissioner Danny Wuerfel speaks at a Senate Finance Committee hearing in Washington, D.C. on April 19, 2023.

cyclists | Bloomberg | Getty Images

“The IRS is increasingly concerned that honest small business owners are being defrauded by unscrupulous parties, and we can no longer tolerate the mounting evidence of an influx of questionable claims,” Werfel said.

The IRS received approximately 3.6 million claims over the course of the program and the current open inventory contains more than 600,000 claims, most of which were received within the past 90 days.

As of July 1, 2023, the IRS Criminal Investigation Division has initiated 252 investigations involving more than $2.8 billion in potentially fraudulent ERC claims. About 15 of the 252 investigations resulted in federal charges, and six of the 15 led to a conviction, Werfel said.

“We want businesses to step back and talk to a trusted tax professional, not a promoter looking to get a big chunk of their refund,” he said.

The agency is working on a settlement program for small businesses that may have received a refund in error.

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