IRS Commissioner Danny Werfel reported to the Senate Finance Committee that even with the moratorium since September 2023 on processing previous and new claims for the ERC, the IRS averages 20,000 new applications weekly.

The IRS recently announced ERC that claims processing could resume by late spring depending on whether Congress extends the statute of limitations for ERC claims. The Treasury Department has proposed extending the statute of limitations to give the IRS additional time to address unscrupulous ERC claims.

The statute of limitations for claims processed for Tax Year 2020 expired on April 15. However, compliance activities regarding Tax Year 2021 ERC claims will continue since that statute does not expire until later.

The IRS Reported the Following in a March New Release: 

The IRS has already sent more than 12,000 letters to entities recapturing the ERC claim that was previously paid. This puts businesses in a position where they owe 100% of the ERC paid to them, plus penalties and interest dating back to the date the ERC was paid.

This initial round of letters covers Tax Year 2020. More letters are planned in the coming months to address Tax Year 2021, which involved larger claims. Congress increased the maximum ERC from $5,000 per employee per year in 2020 to $7,000 per employee for each quarter of the year in 2021.

Among the other IRS compliance actions underway:

• Audits: The IRS has thousands of ERC claims currently under audit.
• Promoter investigations: The IRS is gathering information about suspected abusive tax promoters and preparers improperly promoting the ability to claim the ERC. The IRS’s Office of Promoter Investigations has received hundreds of referrals from internal and external sources. The IRS will continue civil and criminal enforcement efforts of these unscrupulous promoters and preparers.
• Criminal investigations: As of February 29, 2024, IRS Criminal Investigation has initiated more than 386 criminal cases, with claims worth almost $3 billion. Twenty-five investigations have resulted in federal charges, 12 convictions, and six sentencings, with an average sentence of 24 months.

Currently, the IRS reported it has more than 1 million ERC claims awaiting processing. Employers who submitted legitimate ERC claims will have a longer wait for a check. 

Commissioner Werfel reported: “… in our big inventory of claims, there are still eligible claims in the midst, but they’re very hard to find. It’s like finding a needle in a haystack. And so, with your help, we can get those eligible claims found and issued and hold back from issuing the ineligible claims.”