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August 12, 2024
2024-1539

IRS gives update on processing of employee retention credit claims

On August 8, 2024, the IRS announced (IR-2024-203) that it is continuing its enforcement work on high-risk employee retention credit (ERC) claims while also beginning payment of valid ERC claims. Businesses may receive payments for some periods while the IRS continues to review other periods for eligibility.

In recent weeks, the IRS said it has sent out 28,000 disallowance letters for claims that showed a high risk of being incorrect. In addition, the IRS is conducting thousands of audits and has initiated 460 criminal cases.

The IRS has also identified 50,000 valid ERC claims and is "quickly moving them into the pipeline for payment processing in coming weeks," with payments projected to begin in September. The IRS said it anticipates adding another large block of low-risk claims for processing and payment in the fall. In a recent News Release, the IRS said that 10% to 20% of ERC claims show a low risk of being erroneous, 60% to 70% show an unacceptable level of risk, and the final 10% to 20% are high-risk (see Tax Alert 2024-1507).

In the latest News Release, the IRS said it will begin processing the highest-risk and lowest-risk claims filed between September 14, 2023 and January 31, 2024. On September 14, 2023, the IRS had announced a moratorium on processing all claims received after that date (see Tax Alert 2023-1561).

Implications

Taxpayers may receive payments for certain quarters based on the IRS analysis of low-risk ERC claims. Other quarters may result in the IRS sending an information document request (IDR) before processing the claim. Taxpayers should be ready to provide additional support to defend their claim for all quarters to allow for efficient responses in the event of an IDR.

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Contact Information

For additional information concerning this Alert, please contact:

Compensation and Benefits Group

Indirect Tax & State/Local Policy

Tax Policy and Controversy

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor