IRS Disallowing 20,000 Employee Retention Credit (ERC) Claims

Posted on December 7th, 2023

In its ongoing effort to combat questionable Employee Retention Credit (ERC) claims, the IRS has sent more than 20,000 letters advising taxpayers that the agency is disallowing their claims. This initial batch of letters is going to businesses that did not exist or did not have paid employees during the eligibility period (March 13, 2020, and December 31, 2021) to claim the credit.

We previously posted a September 29th article cautioning business owners to be cautious of the aggressive marketing on TV related to ERC claims, which was followed by a November 9th article that included a procedure for those who made ineligible claims to withdraw the claims and avoid future problems with the IRS.

These disallowance letters have identified ineligible claims before they're paid, and:

• Help ineligible taxpayers avoid audits, repayment, penalties, and interest, as well as
• Protect taxpayers by preventing an incorrect refund from going to an ERC promoter.

This is only part of the IRS’s enforcement activities, and the IRS plans additional letters in the future. The IRS continues to warn taxpayers to use extreme caution before applying for the ERC as aggressive maneuvers continue by marketers and scammers. However, those who willfully filed a fraudulent claim or those who assisted or conspired in such conduct should be aware of potential criminal investigation and prosecution.

Please contact this office with questions or assistance.