The IRS is taking action to recover money that was improperly distributed under the Employee Retention Credit (ERC), a program designed to help businesses retain employees during pandemic-related shutdowns. The complex eligibility rules of the ERC made it susceptible to fraud, with scammers targeting small businesses and offering to help apply for the credit for a fee, even if they didn’t qualify. These fraudulent claims have harmed small businesses and the IRS is actively working to address the issue.
The IRS received $225 million from a voluntary disclosure program that ended on March 22, where small businesses could give back money they received in error and keep 20%. Over 500 taxpayers participated in this program, with another 800 submissions still being processed. In addition, an ongoing program allowing small businesses to withdraw unprocessed claims has led to 1,800 businesses pulling back $251 million worth of claims. The IRS has also assessed $572 million in audits of more than 12,000 businesses with over 22,000 improper claims.
IRS Commissioner Danny Werfel expressed concern about the widespread abuse involving fraudulent ERC claims and reiterated the agency’s commitment to helping misled businesses. While the IRS stopped processing new claims in September, they plan to resume processing sometime in the spring. An additional $3 billion in claims is currently under review by IRS Criminal Investigation. The agency is encouraged by the progress made through their initiatives and is continuing efforts to recover improperly distributed funds.
The IRS’s efforts to address fraud related to the Employee Retention Credit have resulted in significant recoveries of funds that were mistakenly or fraudulently distributed to small businesses. Through voluntary disclosure programs and ongoing initiatives, the IRS has retrieved millions of dollars and helped businesses rectify errors in their claims. The agency remains committed to protecting small businesses from abuse and fraud, and has assessed a substantial amount in audits of businesses with improper ERC claims.
Small businesses that thought they received the Employee Retention Credit in error were given the opportunity to participate in a voluntary disclosure program, where they could return the money and keep a portion. Over 500 taxpayers took advantage of this program, while an additional 800 submissions are still being processed. Another initiative allowing businesses to withdraw unprocessed claims has seen 1,800 businesses pulling back $251 million in claims. The IRS’s efforts have been significant in clawing back funds and addressing fraudulent activity surrounding the ERC.
Despite the challenges posed by fraudulent claims related to the Employee Retention Credit, the IRS remains focused on combatting abuse and helping businesses rectify errors. The agency has assessed over $570 million in audits of businesses with improper claims, demonstrating a commitment to recovering funds that were mistakenly or fraudulently distributed. With ongoing initiatives and reviews of additional claims, the IRS is taking proactive steps to address the issue and protect small businesses from further harm.
