IRS Plans to Resume Denials, Payments on ERC Claims

The IRS has announced that it will start processing some of the pandemic-era Employee Retention Credit (ERC) claims that were halted when the moratorium was issued in September 2023. As a reminder, the moratorium was issued due to a surge in new claims within a 90-day period and was just one tactic used by the IRS in stricter ERC claim enforcement. Since the moratorium, the IRS has offered employers multiple chances to withdraw claims filed under false pretenses and has announced billions of dollars in claims under review, audits, and even criminal investigations.

During this period of strict enforcement and opportunities to avoid penalties, employers have been waiting for payment on their legitimate claims and wondering when they would receive them. With the IRS announcement, it appears that those payments could be coming some time this fall.

IRS to start processing claims made after moratorium, issuing payments

Businesses that filed ERC claims between September 14, 2023 and January 31, 2024 will start to see their claims processed. The IRS said that they will start processing the highest-risk and lowest-risk claims first. They report that they plan to issue payments for 50,000 pre-moratorium ERC claims starting in September.

This segment of claims is said to be moving into the “pipeline for payment processing” within the coming weeks. Another large block of low-risk claim payments are expected to go out later this fall. Although that does not give an indication of how many more payments that is, or when exactly they will be distributed, progress is being made and employers can cling to hope that they may not have to wait much longer.

Disallowance letters cause confusion

In addition to the processing and the payments, the IRS also indicated that 28,000 disallowance letters were sent on claims that were believed to have a high risk of being incorrect. These disallowances are estimated to have prevented $5 billion in improper payment disbursements, but not all of them have been accurate.

Tax professionals that received disallowance letters have shared that some of these letters were received in error and criticized the IRS for not providing more information on actions available to them if they disagreed with the disallowance. In response the IRS has reiterated that they will work with those who were improperly denied but maintain that over 90 percent of disallowances were properly issued.

Progress continues on complex ERC claims, no status or timetable on payments

The IRS emphasized it is moving methodically and deliberately on both the disallowances as well as additional payments to balance the needs of businesses with legitimate claims against the promoter-fueled wave of improper claims that came into the agency and caused all the controversy in 2023.

While it is encouraging that payments are being issued and claims are being processed in “large blocks”, there is still no way to check the status of your payment or have a clear expectation of when employers will receive their payments.