IRS ERC Update - Impact on your ERC Refund

03 Jul 2023

After months of silence and minimal refund processing, on June 20th the IRS finally provided an update on their plans for the Employee Retention Credit (ERC). While this update may not be what businesses and practitioners hoping for refunds were expecting, it does offer some clarity on the future of the ERC program.

The Current ERC Landscape

In their recent announcement, the IRS provided a detailed update on its handling of ERC claims, highlighting a structured approach to dealing with various risk levels of claims. This update follows months of extensive review aimed at protecting taxpayers and small businesses from improper claims.

  1. Denial of High-Risk Claims: The IRS identified between 10% and 20% of ERC claims as “high-risk”, often showing clear signs of being erroneous or fraudulent. Tens of thousands of these claims are slated for denial in the coming weeks. This high-risk group includes filings with significant warning signs that fall outside the guidelines established by Congress.
  2. Increased Scrutiny on Medium-Risk Claims: Approximately 60% to 70% of the claims were categorized as having an "unacceptable level of risk." The IRS plans to conduct additional analysis on these claims to gather more information, aiming to enhance compliance review, speed up the resolution of valid claims, and prevent improper payments.
  3. Processing of Low-Risk Claims: The remaining 10% to 20% of ERC claims were deemed low-risk, showing no eligibility warning signs. The IRS will begin processing these claims, with some payments expected to be issued later this summer. However, the IRS stated that the processing pace will be slower compared to the pandemic period.

Additionally, the IRS provided an update on their activity since the ERC Moratorium of September 2023 including:

Processed Claims: The IRS processed 28,000 claims worth $2.2 billion.

Disallowed Claims: More than 14,000 claims worth over $1 billion were disallowed.

Unprocessed Claims: With an inventory of 1.4 million unprocessed claims, the IRS continues to emphasize the importance of patience as it works through these submissions.

Implications for Businesses Unsure of Their ERC Status

Although the IRS update was both warranted and necessary, it has left many business owners uncertain about their refunds. Businesses are unsure which risk category their claims fall under and whether they should prepare for an audit or anticipate a refund later this summer. This uncertainty can be stressful and disruptive, making it crucial for businesses to have a reliable way to track and understand their ERC status.

The Path Forward: TaxNow's ERC Tracking Tools

TaxNow offers multiple features, including our ERC Tracker, for businesses navigating the complexities of ERC claims. Benefits include:

Detailed Claim Insights: Gain clarity on the status of your ERC claim with a user-friendly dashboard that provides a complete overview, including statuses, refund approvals, processing delays, and accrued interest.
Proactive Alerts: Stay informed with real-time notifications about critical milestones such as new quarter approvals, check disbursements, and indications of IRS reviews that could suggest an impending audit.
Continuous Monitoring: Benefit from 24/7 monitoring of your ERC claim, allowing you to focus on running your business while staying updated on your refund status.

TaxNow not only helps you stay ahead of IRS actions but also ensures you are fully informed at all times. TaxNow alleviates the uncertainty surrounding your ERC claims, providing peace of mind and actionable insights.

The Bottom Line

In the wake of the IRS's latest update, staying informed and proactive with your ERC claims is more important than ever. TaxNow offers the comprehensive monitoring and user-friendly interface you need to navigate these complexities with confidence. Don't let uncertainty disrupt your business operations. Sign up for TaxNow today and take control of your ERC claims process.

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