Employee Retention Credit Update
The IRS released an update regarding the Employee Retention Credit claims on June 20th, outlining their findings and plans for ERC claims filed prior to September 14, 2023. This is the most detailed information the IRS has released so far regarding the ERC processing status, but it does not contain a timeline for completing the review of these submissions and issuing refunds.
Employee Retention Credit claims have been classified into three categories by the IRS upon their review of the filings:
- High Risk Group – These claims show clear signs of being erroneous claims – warning signals that clearly fall outside of the guidelines established by Congress. These claims will be denied in the coming weeks.
- Unacceptable Risk Group – The IRS needs to conduct additional analysis to determine the eligibility of these ERC claims. They will be contacting companies for additional information regarding their claim, which may include details of the calculations for eligibility and amounts, copies of government orders regarding business operations during the pandemic, etc. The IRS will contact businesses in this category via mail to request this information. Until that information is received, the IRS will consider these claims as ineligible to protect against improper payments from being made.
- Low Risk Group – These claims have no eligibility warnings signs and are deemed to be legitimate. The IRS will begin to process more of these claims with their payouts later this summer, but at a slower pace than prior payments that went out during the pandemic.
The IRS indicated contacting them to know the status or classification of your claim is not possible. They are asking businesses to allow them to focus on the processing of these claims instead of answering phone calls about them. As claims are processed, the IRS will mail out information related to each claim.
For claims that are unprocessed, the IRS still has a claim withdrawal process available for companies who believe they do not qualify or should not have filed an ERC claim. That must be completed and sent to the IRS prior to your original claim being processed. Please contact us if you have questions about withdrawing your ERC claim. The IRS is also considering re-opening their ERC Voluntary Disclosure Program for those who have received ERC refunds but don’t believe should have filed the claim now
Only claims submitted prior to the moratorium put in place in September 2023 have been classified and ready for additional IRS processing. Those claims filed since the moratorium was established have not been analyzed at this point.
If you receive a notification about your claim or a refund check from the IRS, please contact us. The IRS may deny your ERC claim until they have additional information. If we helped you to file an Employee Retention Credit claim, we have documentation to provide the IRS outlining the analysis for qualifying for these credits. The IRS will make a final determination of eligibility for ERC credits under the guidelines established by Congress.
The Squire Tax Incentives and Credits team will continue to monitor the ERC situation to keep you informed.