For taxpayers that have been waiting in limbo for ERC funds, Thursday’s press release from the IRS signals that resolution is finally on the horizon for about 400,000 of the at least 1.4 million claims still outstanding.
Of the 400,000 claims, the Service has indicated that the vast majority are being processed for approval, representing approximately $10 billion of eligible claims. The exact catalyst for the increased movement in processing of claims is unclear; it could be related to increased congressional pressure, the influx of taxpayers filing lawsuits, or the ever-increasing interest liability the delay in processing continues to create. As IRS Commissioner Danny Werfel states, “The IRS understands the vital importance of Employee Retention Credits payments for struggling small businesses, and we are continuing to make important progress on one of the most complex tax administration provisions we’ve ever had.”
Processing and mailing of the checks related to the 400,000 claims will be seen by taxpayers immediately, with more to come over the weeks and months ahead. Thursday’s press release also included information on a new consolidated claim process for third-party payers and continued to publicize the reopening of the Voluntary Disclosure Program (VDP).
Last month, the IRS opened a consolidated claim process to allow for easier resolution of claims filed through third-party payers like professional employer organizations. Taxpayers who utilized a third-party payer to report and pay federal employment taxes during 2020 and 2021 needed to utilize the same third-party payer group to file an ERC claim. Issues have since arisen with how to revise these filings if a single organization within the payer group wants to rescind or alter their ERC filing. The consolidated claim process lets a third-party payer withdraw the original claim and file a corrected claim for only select clients within a payer group while maintaining the claims of other clients within the same group.
The VDP has reopened for a second time, through November 22, 2024. The program allows businesses that have already received ERC payments but now believe that they are not eligible to resolve incorrect claims without penalties or interest. Businesses can correct improper claims at a 15% discount and avoid any future audits, penalties or interest. The claims withdrawal processes also remain open for businesses whose ERC claims have yet to be paid.
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