IRS Commissioner Danny Werfel spoke after being ceremoniously sworn in at the agency’s headquarters in Washington on April 4, 2023. The IRS announced that it will extend the moratorium on processing claims for the Employee Retention Credit (ERC) following an investigation of over 1 million claims worth roughly $86 billion. The agency found that up to 20% of high-risk filings will be rejected, and an additional 60% to 70% of claims with an “unacceptable level of risk” will be further examined.
Werfel stated in a release that the IRS will use this information to deny billions of dollars in clearly improper claims and begin issuing payments to eligible taxpayers without red flags on their claims. During the ERC review period, the agency processed over 28,000 claims worth $2.2 billion, disallowing more than 14,000 claims worth $1 billion. Compliance efforts for erroneous ERC claims have exceeded $2 billion since last fall.
The IRS is encouraging taxpayers with pending ERC claims to consider its withdrawal program, which allows them to withdraw a claim if they haven’t received a payment or if they received a check but haven’t cashed or deposited it. The IRS will undo the original ERC claim without applying any penalties or interest. According to Dean Zerbe, national managing director at Alliantgroup, this program provides taxpayers with a “mulligan moment” to fix ERC mistakes before the IRS catches them.
As there are over 1.4 million unprocessed ERC claims and many questionable filings, the IRS is urging taxpayers to consider using the withdrawal program if needed. The agency is working to protect taxpayers against improper payouts while ensuring that payments reach those who are truly eligible.
