On August 8^th, 2024, the Internal Revenue Service announced it is accelerating more payments and continuing compliance work on outstanding ERC claims. It’s estimated between that 10% and 20% of the unprocessed ERC claims show a low risk of noncompliance. For those with no eligibility warning signs that were received prior to last fall’s moratorium, the IRS will resume processing.

Additional payments for 50,000 valid claims are moving into processing.

In the latest step, the IRS announced that low-risk ERC claims will be paid out quickly. The IRS has identified 50,000 of these claims. After processing is complete, the claims will be paid out to taxpayers. The IRS projects payments will begin in September with additional payments going out in subsequent weeks. They anticipate adding another large block of additional low-risk claims for processing and payment in the fall.

The agency reminded businesses that they may receive payments for some valid tax periods – generally quarters – while the IRS continues to review other periods for eligibility. ERC eligibility can vary from one tax period to another if, for example, government orders were no longer in place or a business’s gross receipts increased.

ERC compliance work continues.

The IRS continues to work on denials of improper ERC claims, intensifying audits and pursuing civil and criminal investigations of potential fraud and abuse. The findings of the IRS review, announced in June, confirmed concerns raised by tax professionals and others that the current inventory of ERC claims contained an extremely high rate of improper ERC claims.

In recent weeks, the IRS has sent 28,000 disallowance letters to businesses whose claims showed a high risk of error. The IRS estimates that these disallowances will prevent up to $5 billion in improper payments. Thousands of audits are underway, and 460 criminal cases have been initiated.

“The Employee Retention Credit is one of the most complex tax provisions ever administered by the IRS, and the agency continues working hard to balance our work to protect taxpayers from improper claims while also making payments to qualifying businesses,” said IRS Commissioner Danny Werfel. “It has been a time-consuming process to separate valid claims from invalid ones. During the past year, we maintained a steady cadence of both ERC approvals and disapprovals.”

This is a positive development.  We have heard some taxpayers have already received refunds.  Others remain frustrated as there is no way to check the status of a claim.