The IRS issued another announcement on how it intends to process Employee Retention Tax Credit or ERTC claims and issue ERTC refunds.  In previous announcements the IRS stated it was lifting the moratorium on Employee Retention Tax Credit or ERC refunds, but was going to leave most businesses in bureaucratic limbo.  The IRS recently announced it would begin issuing Employee Retention Tax Credit or ERC refunds starting in September 2024 on about 50,000 claims. 

The IRS also stated in the recent announcement it issued 28,000 rejection notices to so-called high-risk claims. In addition, the IRS stated it was going to continue to “move methodically and deliberately processing the remaining claims.”  In its previous announcement, the IRS noted it had over a million pending ERC claims to process.  This means approximately one million claims will remain in ERC limbo – neither receiving a refund nor receiving a rejection letter. 

The IRS states its administrative delays were due to a “flood” of improper claims and blames promoters using “aggressive” and “potentially predatory” marketing tactics for creating a flood of improper claims.  While there is no doubt abuse of the ERC program has occurred, businesses with legitimate claims that used reputable tax professionals must still wait for their valid relief.    

The IRS’ announcement continued to publicize its enforcement efforts against suspect ERC claims just as it had in its previous announcements.  The recent IRS announcement reiterated it had “thousands of audits underway” of ERC claims and reported it has initiated 460 criminal investigations.  Additionally, the IRS stated it was initiating civil and criminal enforcement efforts against aggressive promoters again, blaming them for the administrative delays.

The IRS’ most recent announcement may not contain good news for the majority of businesses with pending ERC claims.  Many businesses can perhaps breathe a sigh of relief if they did not receive a rejection notice as this may indicate their claims are probably not in the so-called “high risk” group.  The majority of businesses, however, will be forced to wait as the IRS processes ERC claims at a glacial pace.  A few businesses may be fortunate enough to get their long-awaited refunds this fall, but the vast majority of businesses with pending ERC claims will have to continue to wait for their entitled relief. 

Businesses waiting for their ERC claims may not have many palatable options. While some businesses with large claims may wish to initiate a lawsuit in federal court, litigation in federal court may be a long and costly option.  Businesses that file lawsuits in federal court may do so not with the intent of prevailing in federal court, but with the intent of hastening administrative action on their claims.  It remains unseen if and how federal lawsuits will hasten the IRS to expedite pending ERC claims. 

RJS LAW has helped hundreds of businesses with IRS and other tax problems.  It has decades of combined experience helping businesses navigate their way through disputes with the IRS and other taxing authorities.  Please call us at 619-595-1655 or via the web at RJS LAW for a free consultation if you have any problems or concerns with your business’ ERC claim.