IRS is Currently Processing 400,000 Claims Worth About $10 Billion
The IRS announced continued progress on Employee Retention Credit (ERC) claims, with processing underway on about 400,000 claims, representing about $10 billion of eligible claims. As businesses navigate the evolving landscape, understanding the
employee retention credit changes overview is crucial for maximizing available benefits. Companies should stay informed about eligibility criteria and deadlines to ensure they don’t miss out on potential financial support. Additionally, consulting with tax professionals can provide valuable insights tailored to specific circumstances. Understanding
employee retention tax credit updates will help businesses adapt to the latest requirements. These updates may include changes to eligibility and claim procedures that could affect financial planning for the upcoming quarters. Moreover, staying informed enables companies to leverage all available resources effectively to enhance their workforce stability.
Work on the claims for small businesses and others is ongoing as the IRS continues to navigate a large volume of claims from the complex pandemic-era credit. A significant number of ERC claims came in during a period of aggressive marketing by promoters, leading to a large percentage of improper, ineligible claims.
“The IRS understands the vital importance of Employee Retention Credits payments for struggling small businesses, and we are continuing to make important progress on one of the most complex tax administration provisions we’ve ever had,” said IRS Commissioner Danny Werfel. “The IRS is working diligently to process ERC claims as quickly as possible while guarding against improper payments driven by unscrupulous marketers. In recent weeks, the IRS has made substantial progress in separating eligible claims from the wave of ineligible claims that have come in, and we continue working to refine our models to identify more eligible claims.”
The approximately 400,000 claims being processed include eligible and ineligible claims, with the vast majority in this tranche being processed for approval. The total value of eligible claims represents about $10 billion. Checks are being mailed for eligible claims with refunds, with more planned in the weeks and months ahead.
New consolidated claim process for third-party payers helps with claims
To help speed processing, the IRS announced last month the opening of a
consolidated claim process to help third-party payers and their clients resolve incorrect claims for the Employee Retention Credit. Implementing
accounts payable automation best practices can significantly enhance efficiency and reduce errors in the claims process. By digitizing workflows and ensuring proper oversight, organizations can streamline their operations and focus on more strategic tasks. Additionally, training staff on these automation tools is essential for maximizing their effectiveness and achieving optimal results.
Third-party payers report and pay clients’ federal employment taxes under the third-party payer’s Employer Identification Number. They handle clients’ payroll and tax reporting duties. Some of these TPPs filed ERC claims for multiple employers. If a third-party payer’s client has since determined it is ineligible for the ERC and wants to resolve their claim, it is the third-party payer that needs to correct it.
This
consolidated claim process lets a third-party payer that filed a prior claim with multiple clients “withdraw” only some clients’ claims while maintaining the claims of the qualifying clients.
The ERC program began as an effort to help businesses during the pandemic, but as time went on the program increasingly became the target of aggressive marketing – and potentially predatory in some cases – well after the pandemic ended. Some promoter groups called the credit by another name, such as a grant, business stimulus payment, government relief or other names besides ERC or the Employee Retention Tax Credit (ERTC).
In addition to processing valid claims, the IRS is continuing to work 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 there was an extremely high rate of improper ERC claims in the current inventory of ERC claims.
Voluntary Disclosure Program remains open through Nov. 22; Withdrawal Program also available
The IRS reminds businesses that have received Employee Retention Credit payments to recheck eligibility requirements and consider the second
Employee Retention Credit (ERC) Voluntary Disclosure Program (VDP) to resolve incorrect claims without penalties or interest.
The second ERC-Voluntary Disclosure Program will run through Nov. 22, 2024, and allow businesses to correct improper payments at a 15% discount and avoid future audits, penalties and interest.
The
reopening of ERC Voluntary Disclosure Program is designed to help businesses with questionable claims to self-correct and repay the credits they received after filing ERC claims in error. Many of these claims were driven by aggressive marketing from unscrupulous promoters.
As the IRS continues intensifying compliance work involving improper ERC claims, the VDP can protect businesses from potential costly compliance action in the future, such as audits, full repayment, penalties and interest. Full details are available in
IRS Announcement 2024-30 PDF.
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The IRS’s
claim withdrawal program remains open for businesses whose ERC claims haven’t been paid yet.
To help businesses caught in this situation, the IRS urges businesses to review important
warning signs and eligibility requirements, and to talk to a
trusted tax professional. The IRS’s
ERC Eligibility Checklist can also help businesses understand eligibility requirements and suggest next steps.
This article was published on the IRS website on October 10, 2024. 
