IRS Disallowing 20,000 Employee Retention Tax Credit (ERTC) Claims

In its ongoing effort to combat questionable Employee Retention Tax Credit (ERTC) claims, the IRS has sent over 20,000 letters advising taxpayers that the agency is disallowing their claims. This initial batch of letters is going to businesses that did not exist or did not have paid employees during the eligibility period (March 13, 2020, and December 31, 2021) to claim the credit.

These disallowance letters have identified ineligible claims before they're paid, and:

• Help ineligible taxpayers avoid audits, repayment, penalties, and interest, as well as
• Protect taxpayers by preventing an incorrect refund from going to an ERTC promoter.

This is only part of the IRS’s enforcement activities, and the IRS plans additional letters in the future. The IRS continues to warn taxpayers to use extreme caution before applying for the ERTC as aggressive maneuvers continue by marketers and scammers. However, those who willfully filed a fraudulent claim or assisted or conspired in such conduct should be aware of potential criminal investigation and prosecution. There is currently a provision in a tax package in Congress that will sunset the ability to apply for ERTC as of January 31, 2024.

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