The IRS recently announced it has lifted its moratorium on processing Employee Retention Tax Credit (ERC or ERTC) claims.  Many businesses across the country have been waiting several months to receive their rightfully deserved refunds from their IRS ERC Claims.  According to the IRS some of these businesses will begin to receive their refunds soon, however, many other businesses either be rejected or remain in refund limbo.

The IRS’ recent announcement states 10-20% of the pending ERC claims were so-called “low risk” claims.  The IRS claims it will once again begin “judiciously processing” these so-called “low risk” claims.  Taxpayers in the so-called “low risk” group will supposedly start receiving refunds in the coming weeks.

The IRS’ announcement also states that 10-20% of the pending ERC claims are “high risk” claims.  The announcement states these so-called “high risk” claims contain “warning signals” and that the IRS plans to reject these “high risk” claims.

The IRS’ announcement further claims the remaining 60-70% of pending ERC have an “unacceptable level of risk.” However, the IRS said it will not immediately reject these claims as they are neither “high risk” or “low risk.”  Deeming this group to be what I will call the “middle risk” group, it appears these claims will continue to remain in limbo as the IRS “conduct[s] additional analysis.”

Taxpayers in the “low risk” group can rejoice in that they will be receiving the relief they have waited several months to receive.  The other two groups of taxpayers may still have to wait to receive relief.

The Taxpayers in the so-called “high risk” group may arguably be better off as they will know the status of their claims.  While the “middle risk” group continues to wait for the IRS to complete its “additional analysis” the “high risk” group will receive a rejection letter to close their claims.  While these taxpayers would have preferred to receive a refund check, the rejection letter does open the door to the “high risk” taxpayers to pursue other legal remedies such as requesting an Appeals Conference with the IRS Independent Office of Appeals, or they can take their case to District Court. 

The “middle risk” group, while not receiving a rejection letter, must still wait indefinitely for the IRS to reach a determination.  They cannot take their case to IRS Appeals without a rejection letter. 

While the IRS may have its reason for sorting ERC claims in “high risk” or “low risk” groups, the sorting process is not going to be without error.  Taxpayers with perfectly valid ERC claims will inevitably find themselves in either the “high risk” or “middle risk” groups.  These Taxpayers will need to avail themselves of their administrative remedies and other legal rights to get their rightfully claimed relief benefits.

RJS LAW helps businesses with ERC claims and other tax issues.  If you are having problems with your ERC claim or have other tax related issues before the IRS or any state related taxing authority, our team of experienced tax attorneys are available for a free consultation.  Please call RJS Law at 619-595-1655 or via the web at RJS LAW to discuss your needs.

Written by Joseph Cole, Esq., LL.M.