The IRS has recently announced that it will be accelerating the payment of 50,000 Employee Retention Credit (ERC) claims over the next few weeks. While this is good news for businesses awaiting payments, it comes with a significant warning: the IRS is moving cautiously to ensure that only legitimate claims are processed, while also addressing a surge in improper claims promoted by aggressive marketers.
As the IRS Commissioner Danny Werfel stated, “The Employee Retention Credit is one of the most complex tax provisions ever administered by the IRS.” The agency’s dual focus is to protect taxpayers from improper claims and expedite payments to those businesses with legitimate claims.
In light of the IRS’s ongoing efforts to scrutinize and disallow high-risk claims, here are five warnings that businesses should be aware of when filing or assessing their ERC claims:
1. Beware of Unresponsive or Unreachable ERC Providers
If your ERC provider has become unresponsive or difficult to contact, it could be a red flag. Businesses should be able to contact their providers for updates, clarifications, or any concerns they may have. If you’re facing this issue, it might be time to seek professional advice.
2. Ensure You Have Detailed Documentation
Every legitimate ERC claim should be accompanied by a thorough explanation of how your company meets the eligibility requirements. If your provider did not deliver such documentation, your claim might be at risk. Proper documentation is crucial for substantiating your eligibility, especially if your claim is audited.
3. Caution with Claims Based on “Government Orders” or “Supply-Chain Disruptions”
Claims based on government orders or supply-chain disruptions have come under increased scrutiny by the IRS. If your eligibility relied heavily on these factors, your claim might be more vulnerable to disallowance. Ensure that these claims are well-documented and justified.
4. Research Your ERC Provider’s Reputation
If your ERC provider has been mentioned in news articles or is involved in lawsuits, this could be an indicator of potential issues. Engaging with a reputable and trustworthy provider is crucial to minimizing your risk of having a claim disallowed.
5. Pay Attention to IRS Audits or Denials
Receiving a disallowance letter or notification of an audit from the IRS should prompt immediate action. With 28,000 disallowance letters already sent out, businesses in this situation need to carefully assess their position and consider consulting with experts to mitigate risks.
How ABGi Can Help
ABGi specializes in helping companies evaluate the risk of their ERC claims, whether they have already been paid or are still awaiting processing. If any of the above warnings resonate with your situation, it’s crucial to act FAST.
Schedule a free ERC Health Check with a tax attorney now to review your risk profile and determine the best course of action. Don’t wait until it’s too late—contact us today to get peace of mind and ensure your claim is secure.