State Bar of California
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IRS Snail-Paced Claims Processing and ERC Warning Signs in 2024

What Is the Current Status of IRS Claims Processing, and Why Is There Concern About Backlogs?

The IRS Commissioner has indicated that while the full moratorium on processing claims will end by April or May, the agency is only processing about 1000-2000 claims per week. This slow rate of processing is contributing to a growing backlog, with potentially over 1 million claims pending, and with a real potential for some claims never being processed at all.

What Are Some Indicators of Questionable ERC (Employee Retention Credit) Claims, As Outlined by the IRS?

The IRS has issued seven warning signs for questionable ERC claims, including:

  • Claiming too many quarters without meeting eligibility criteria.
  • Using generic narratives about governmental orders without sufficient documentation.
  • Incorrect employee counts and calculations.
  • Inaccurately citing supply chain disruptions.
  • Overstating qualifying wages without proper payroll records.
  • Claiming credits for periods when wages were not paid, or the business did not exist.
  • Promoters promising no risk associated with the claims.
Who Is the IRS Targeting Regarding Erroneous ERC Claims?

The IRS is pursuing both taxpayers who have submitted questionable claims and promoters who have facilitated these claims. Both parties may face scrutiny and potential consequences for inaccurate or fraudulent claims.

By addressing these FAQs, taxpayers can gain clarity on the current challenges with IRS claims processing and understand the warning signs associated with ERC claims to ensure compliance with IRS guidelines.

What Actions Can Taxpayers Take Regarding Delayed Claims?

Taxpayers facing excessive delays in claim processing have few options. They can reach out to their Congressional Representatives, who may be able to advocate on their behalf.

However, we always recommend that you seek the advice of a specialist tax attorney when dealing with any tax litigation matters especially the ERC claims given the IRS’ current scrutiny.

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