IRS Takes A Notch On Fraudulent Claims on ERC

IRS Takes A Notch On Fraudulent Claims on ERC

Over 20,000 disallowance letters were mailed to taxpayers and entities that either did not exist or had no employees during the eligibility period as part of the Internal Revenue Service’s (IRS) crackdown on fictitious Employee Retention Credit (ERC) claims.

It had found a sizable number of taxpayers who did not meet the requirements for the credit, stepping up its examination of ERC claims as part of a larger effort to protect against fraudulent claims. Those who are found ineligible will begin receiving Letter 105 C this week, according to the IRS, which will inform them that their claim has been denied.

The employee retention credit, or ERC, was developed to aid small businesses during the COVID-19 pandemic and is worth thousands of dollars for each qualified employee.
The IRS released a special withdrawal procedure less than two months ago for small businesses that had falsely claimed the credit to avoid paying back the money they owed plus interest and penalties.

“As we continue our audit and criminal investigation work involving the Employee Retention Credits, we continue to urge people who submitted a claim to review the rules with a trusted tax professional. If they filed an inaccurate claim, we urge them to consider withdrawing their pending claim or use the upcoming disclosure program to repay improper refunds to avoid future action,” Commissioner Danny Werfel said in a statement.

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