Commissioner Werfel testifying before the House Subcommittee on
Financial Services and General Government

Claims for almost $400 million in unpaid employee retention credits (ERCs) deemed ineligible have been withdrawn by taxpayers since the agency placed a moratorium on processing new claims last year, IRS Commissioner Danny Werfel told a congressional subcommittee, CPA Practice Advisor reported.

Testifying before the U.S. House of Representatives’ Subcommittee on Financial Services and General Government on May 7, which is considering the IRS’s 2025 budget request, Werfel also said that $777 million has been received from businesses that voluntarily returned the tax credits after being found ineligible.

“After filing season, we were going to conduct an assessment of our inventory to figure out the best way to proceed. Unfortunately, there are a lot of ineligible claims in our inventory, and who is suffering from that? The eligible claims,” he told the lawmakers.

Werfel ordered the moratorium in September, “following growing concerns inside [the IRS], from tax professionals as well as media reports that a substantial share of new claims from the aging program are ineligible and increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing,” said the IRS at the time.

A month later, the agency established a new process that gave employers the ability to rescind what may have been inaccurate ERC claims. In December, it announced a voluntary disclosure program for businesses that received refunds for erroneous ERC claims.

Werfel also told the panel that the IRS had protected more than $1 billion in revenue in six months as a result of increased enforcement surrounding questionable ERC claims, a figure that the IRS had previously announced.

He said the IRS is working with the Taxpayer Advocate Office to move “hardship cases”—struggling businesses that are eligible for the ERC and have submitted claims for the credit but have yet to receive funding—to the front of the line.

“I want to work to make sure that those that have the most urgent need—while we’re continuing to sort through what is a very challenging situation—that we address those quickly,” he said. “The intention is to find the eligible ones and get [the credit] to them as quickly as possible.”