Introducing the ERC Withdrawal Program: What You Need to Know
In recent news, the IRS announced that they will be denying billions of dollars’ worth of claims for the pandemic-era tax break known as the employee retention credit (ERC). This tax credit was enacted to support small businesses during the Covid-19 pandemic, with the potential to provide thousands of dollars per eligible employee.
However, due to a surge of “questionable claims,” the IRS stopped processing new filings in September and has now extended that moratorium. After investigating over 1 million claims totaling roughly $86 billion, the IRS has identified 10% to 20% of the highest-risk filings, with “tens of thousands” set to be rejected in the coming weeks. Additionally, 60% to 70% of claims with an “unacceptable level of risk” will be further examined.
IRS Commissioner Danny Werfel stated, “We will now use this information to deny billions of dollars in clearly improper claims and begin additional work to issue payments to help taxpayers without any red flags on their claims.”
During the ERC review period, the agency processed 28,000 claims received before September 2023, worth $2.2 billion, and disallowed more than 14,000 claims totaling $1 billion. Compliance efforts for erroneous ERC claims have exceeded $2 billion since last fall.
With over 1.4 million unprocessed ERC claims and many questionable filings, the IRS is urging taxpayers with pending ERC claims to consider their withdrawal program. This program allows taxpayers to withdraw their claim if they have not received a payment for any tax period or return a check that has not been cashed or deposited. No penalties or interest will apply if eligible for the program.
Dean Zerbe, national managing director at Alliantgroup, referred to this as a “mulligan moment,” emphasizing that taxpayers can rectify ERC mistakes before the IRS catches them.
At Extreme Investor Network, we understand the importance of maximizing tax benefits and ensuring compliance with IRS regulations. Our experts provide personalized financial advice and strategies to help you navigate intricate tax credits like the ERC. Stay informed and make informed financial decisions by connecting with us today.