
Former IRS Commissioner Chuck Rettig has urged the agency to immediately resume processing legitimate Employee Retention Credit (ERC) claims, Going Concern reported. In an opinion piece published in Fortune magazine last week, Rettig wrote that while he agreed with the IRS’s moratorium on processing new ERC claims when it was announced last September, he believes that the agency should no longer wait in processing claims deemed legitimate.
The ERC is a refundable tax credit for businesses that continued to pay employees while shut down due to the COVID-19 pandemic or that had significant declines in gross receipts from March 13, 2020, to Dec. 31, 2021. The IRS repeatedly warned businesses and tax-exempt groups to be wary of companies and individuals that falsely tell them that they are eligible for the credit. But those repeated warnings did not deter many unscrupulous promoters from falsely advertising their ability to obtain the credit for almost anybody.
The IRS initially imposed the moratorium in order to add more safeguards to prevent future abuse and to protect businesses from predatory tactics. At the time IRS also said that it was working with the U.S. Department of Justice to pursue fraud fueled by aggressive marketing.
In December, the IRS sent more than 20,000 letters to taxpayers to inform them that their ERC claims had been denied after an initial review found large numbers of claimants who did not meet the eligibility requirements for the credit.
This past June, the IRS announced plans to start a new round of processing lower-risk ERC claims to help eligible taxpayers, while also denying tens of thousands of improper high-risk claims. The IRS stated at the time that it “anticipates some of the first payments in this group will go out later this summer. But the IRS emphasized these will go out at a dramatically slower pace than payments that went out during the pandemic period given the need for increased scrutiny.”
The IRS also stated, “As the additional IRS processing work begins at a measured pace, other claims will begin being paid later this summer following a final review. This additional review is needed because the submissions may have calculation errors made during the complex filings. For those claims with calculation errors, the amount claimed will be adjusted before payment The IRS also noted that generally the oldest claims will be worked first, and no claims submitted during the moratorium period will be processed at this time.”
In his opinion piece, Rettig wrote, “The IRS has said that it would 'begin judiciously processing more’ low-risk claims, with the first payments going out later in the summer. However, the already identified low-risk ERC claims, submitted by struggling small businesses, should be approved and paid now. Immediately approving and paying low-risk ERC applicants would greatly benefit the roughly 150,000-300,000 applicants who are still operating in a challenging economic environment.”
In conclusion, Rettig said, “It is true that the fog of war and the predatory schemes of some bad actors misled some small businesses into thinking they were eligible for ERC when they were not. However, fighting fraud should not come at the expense of legitimate small businesses with claims pending at the IRS.”