Important Update: Employee Retention Credit Status
The Employee Retention Credit (ERC), a relief measure introduced during the pandemic, has seen significant updates recently. Here’s a breakdown of the latest changes:
End of Processing Moratorium
After a prolonged pause in processing new ERC claims, the IRS has resumed processing applications filed after September 14, 2023. Priority is being given to high- and low-risk claims filed between September 2023 and January 2024. The IRS aims to clear backlogs and begin issuing payouts for legitimate claims while increasing scrutiny on fraudulent claims. Payments could be sent out as early as September for approved claims.
Reopening of the Voluntary Disclosure Program
On August 15, 2024, the IRS announced the much-anticipated reopening of a second Voluntary Disclosure Program (Second ERC-VDP) to help businesses address incorrect ERC claims as the agency continues its compliance work. The Second ERC-VDP will run through November 22, 2024 and allows businesses a chance to correct improper payments at a 15% (down from 20% previously) discount and avoid future audits, penalties and interest.
Audit and Enforcement Efforts
The IRS continues its efforts to detect improper claims. As of 2024, the agency has sent out over 28,000 rejection letters, preventing up to $5 billion in improper payments. Thousands of audits are ongoing, and the IRS is also pursuing criminal charges in cases of fraud. As the IRS is working through claims, letters may be sent to claimants requesting additional information in order to update and process their claims.
Heightened Scrutiny and Legislative Uncertainty
The IRS has implemented new risk analysis measures to ensure compliance as it resumes processing. Additionally, there is ongoing legislative debate about the future of the ERC, with potential proposals to end the credit entirely
These updates indicate a dual approach by the IRS: expediting legitimate payments while intensifying efforts to curb fraud. For businesses awaiting their claims, patience remains essential as the IRS navigates this complex process. If you receive communication from the IRS and need assistance, please reach out to the team at SDK CPA through email at info@sdkcpa.com or call us at 612-332-5500.
