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Knowledge & Insights

Key Updates on IRS ERC Claims Scrutiny


The Internal Revenue Service (IRS) is taking significant steps to address dubious Employee Retention Credit (ERC) claims. With over 20,000 letters being sent to notify businesses of disallowed claims, the IRS aims to curb improper applications and ensure the integrity of the ERC program.

Understanding the IRS’s ERC Claims Initiative

The IRS is primarily focusing on claims filed by entities that were either non-existent or had no employees during the eligibility period. This increased scrutiny is a response to misleading marketing tactics that have potentially led many small businesses and organizations to file incorrect claims.

The Impact of IRS Actions on Businesses

The IRS’s move involves a two-fold strategy: disallowing claims from ineligible entities and introducing a voluntary disclosure program. This program allows businesses that may have filed erroneous claims to rectify their filings proactively. Additionally, a special withdrawal program is in place for those wishing to retract their pending claims, thus avoiding future complications.

Criteria for IRS Disallowance of ERC Claims

The IRS disallowance focuses on two key issues:

  • Entities Not Established During the Eligibility Period: The ERC is applicable for wages paid between March 13, 2020, and December 31, 2021. Claims by entities set up after December 31, 2021, do not qualify.
  • Entities Without Paid Employees in the Eligibility Period: The ERC is intended as a credit for wages paid. Entities with no payroll during this period are ineligible.

Future Steps by the IRS and Business Preparedness

Further actions by the IRS include additional letters and the finalization of the voluntary disclosure program. Businesses must stay informed and prepared to respond appropriately to IRS communications and take the necessary steps to ensure compliance.

Addressing Misleading ERC Marketing Tactics

The IRS warns against aggressive ERC marketing tactics, which can lead to misinformed or fraudulent claims. Businesses are advised to exercise due diligence and seek professional advice before filing for the ERC.

The Significance of Proper ERC Claim Filing

When correctly claimed, the ERC serves as a vital tax relief measure for businesses that sustained employee payroll during COVID-19-related disruptions. It’s crucial for businesses to understand and comply with the eligibility criteria to benefit from this tax credit.

Withdrawing Pending ERC Claims

The IRS is offering an option to withdraw ERC claims for employers who may have filed inaccurately. This withdrawal can help avoid potential future legal and financial issues.

Securing Your Business’s Financial Future

Navigating the complexities of tax credits like the ERC can be challenging. As experts in financial and tax solutions, we at GreenGrowthCPAs provide invaluable guidance and support in ensuring your claims are compliant and maximized. 

Apart from ERC claim assistance, GreenGrowthCPAs offers a wide range of services including tax planning, financial strategy development, compliance management, and more. Our holistic approach ensures that your business is not only compliant but also financially robust and strategically positioned for growth.

Don’t let the complexities of tax compliance overshadow your business’s potential. Contact us today for expert advice and secure your business’s financial future.

Request a Free Consultation & learn how GreenGrowth CPA’s can help your business grow.

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