IRS Provides Update on Employee Retention Credit (SNF/AL)

The IRS recently released an update on the next stages of its Employee Retention Credit (ERC) work. The IRS shares that, “following a detailed review to protect taxpayers and small businesses,” the agency plans to deny tens of thousands of improper high-risk Employee Retention Credit (ERC) claims while starting a new round of processing lower risk claims to help eligible taxpayers.

The IRS shares that it continues to be concerned about small businesses waiting on legitimate claims. Between 10% and 20% of the ERC claims show a low risk. For those with no eligibility warning signs that were received prior to the last fall’s moratorium, the IRS will begin judiciously processing more of these claims.

The agency anticipates some of the first payments in this group will go out later this summer but at a slower pace than payments that went out during the pandemic. The IRS made clear that, generally, the oldest claims will be processed first, and no claims submitted during the moratorium period will be processed at this time. In light of the large inventory and the results of the ERC review, the IRS will keep the processing moratorium in place​ on ERC claims submitted after September 14, 2023. It will use this period to gather additional feedback from partners, including Congress and others, on the future course of ERC.

Taxpayers with claims do not need to take any action at this point. The agency emphasized that those with ERC claims should not call IRS toll-free lines because additional information is generally not available on these claims as processing work continues.

Finally, the IRS warns of promoters using this announcement as a springboard to attract more clients to file ERC claims. Some promoters told taxpayers every employer qualifies for ERC. The IRS and the tax professional community emphasize that this is not true. Eligibility depends on specific facts and circumstances. More details on IRS resources around ERC eligibility is available here.