IRS Cracks Down on Wrongful Employee Retention Credit Claims

Recent reports from the IRS indicate a crackdown on businesses that wrongfully claimed the Employee Retention Credit (ERC). The IRS has open investigations and under review cases regarding the ERC as of January 25. Those who voluntarily disclose their erroneous claims must provide the name of the promoter who encouraged them to take the credits. The IRS also introduced a voluntary withdrawal program for unprocessed ERC claims. Recipients of disallowed ERC claims will be informed that the IRS will recapture the erroneously claimed payments through normal tax assessment and collection procedures. The IRS is focusing on tax years 2020 and 2021, with impending letters for the latter expected to be sent out this spring as the statute of limitations for 2020 draws near in April.