IRS Commissioner Danny Werfel recently gave a speech at the IRS headquarters in Washington, D.C., after being ceremonially sworn in on April 4, 2023. The agency announced that it will extend the moratorium on processing certain claims while it investigates potentially fraudulent activity. After reviewing more than 1 million claims worth approximately $86 billion, the IRS identified high-risk filings totaling 10% to 20% of the claims. It plans to reject “tens of thousands” of these claims in the upcoming weeks and will examine an additional 60% to 70% of claims with an “unacceptable level of risk.”
During the review period for Employee Retention Credit (ERC) claims, the IRS processed 28,000 claims received before September 2023, totaling $2.2 billion. More than 14,000 claims worth $1 billion were disallowed during this time. Overall, the IRS has recovered over $2 billion from erroneous ERC claims since last fall.
With over 1.4 million unprocessed ERC claims and many questionable filings, the IRS is encouraging taxpayers to consider its withdrawal program for pending ERC claims. Withdrawals can be made if a payment has not been received for a specific tax period or if a check has been received but not cashed or deposited. Those eligible for the program will have their original ERC claim undone with no penalties or interest applied.
IRS Commissioner Werfel stated, “We will now use this information to deny billions of dollars in clearly improper claims and begin additional work to issue payments to help taxpayers without any red flags on their claims.” Dean Zerbe, national managing director at Alliantgroup, previously called the withdrawal program a “mulligan moment” where taxpayers have an opportunity to rectify ERC mistakes before the IRS discovers them.”