IRS Tightens Scrutiny on Employee Retention Credit Claims, IR-2024-169

The IRS has announced plans to deny tens of thousands of high-risk Employee Retention Credit (ERC) claims while beginning to process lower-risk claims. The agency’s review has identified a significant number of improper claims. “The completion of this review provided the IRS with new insight into risky ERC activity,” IRS Commissioner Danny Werfel said. The Service aims to deny billions in improper claims and expedite payments for legitimate claims following an in-depth analysis that began last September.

The IRS‘s review has revealed that 10 to 20-percent of ERC claims fall into the highest-risk category, showing clear signs of being erroneous. These claims, submitted during aggressive marketing campaigns, will be denied in the coming weeks. Additionally, 60 to 70-percent of claims show an unacceptable level of risk and will undergo further analysis. For the 10 to 20-percent of claims deemed low-risk, processing will resume at a slower pace to ensure increased scrutiny and compliance. Initial payments from this group are expected later this summer.

In response to the findings, the IRS will continue its moratorium on new ERC claims submitted after September 14, 2023. This pause allows for further consultation with Congress and other stakeholders on the program’s future. The IRS has also encouraged businesses with unprocessed claims to use the special ERC Withdrawal Program to avoid compliance issues. Compliance efforts around erroneous ERC claims have surpassed $2 billion, with ongoing audits and criminal investigations targeting fraudulent claims and promoters.