Even the Internal Revenue Service has acknowledged the Employee Retention Credit (ERC) claim process has been beleaguered by fraud and abuse. That’s why the tax agency stopped accepting new ERC filings last year, and has focused on working through existing claims.
While some ERC claimants have received tax credit money for keeping staff on payroll during the height of the coronavirus pandemic, others are getting bad news from the IRS. Their ERC claims have been denied.
The unwelcome word is arriving as IRS Letter 105-C. The mailed correspondence means the IRS has found the claim ineligible, and has disallowed, or denied, the amount that the business claimed either as a refund or as a reduction of the tax owed for the tax period.
Generally, Letter 105-C includes —
- Reason for the IRS’ disallowance decision,
- Date of the decision,
- Tax year or period for which the claim is denied,
- Taxpayer’s appeal rights, and
- Timeframe in which you must file suit if you wish to challenge our denial in court.
IRS.gov has a special Understanding Letter 105-C, Disallowance of the Employee Retention Credit page with more on the letter and the next steps a company can take if it disagrees with the agency’s finding.
Other options out, too: The IRS also notes that businesses receiving a disallowance letter are not eligible for either the agency’s second ERC Voluntary Disclosure Program or the claim withdrawal program.
The ERC claim withdrawal program lets businesses that discover they’ve improperly filed for the benefit, but whose claims have not yet been processed by the IRS, to pull their errant filings.
The second ERC disclosure program, which runs through Nov. 22, is similar to the original one that ended this spring. Companies that received improper ERC money can repay those amounts at a 15 percent discount and avoid any IRS follow-up <ahem> audit <ahem> in the matter.
Capitol Hill ERC actions: Meanwhile, members of Congress also are taking actions in connection with the ERC.
Sens. Mitt Romney (R-Utah), Thom Tillis (R-North Carolina), and Joe Manchin (I-West Virginia) introduced the Employee Retention Tax Credit Repeal Act. The measure would disallow the processing of Employee Retention Tax Credit (ERTC) claims filed after January 31, 2024 and increase penalties on fraud.
The trio cited the credit’s cost, which Romney said was nearly 200 percent more than originally projected. He and his colleagues said the ERC added an estimated $230 billion to the national debt through Fiscal Year 2023, and elimination of the tax break would save taxpayers an estimated $79 billion over 10 years.
Meanwhile Massachusetts’ two Democratic U.S. senators are urging the IRS to expedite ERC claim payments. Specifically, Sens. Edward J. Markey and Elizabeth Warren want the agency to prioritize low-risk claims from taxpayers experiencing financial hardship.
“The Employee Retention Tax Credit (ERC) was an important lifeline that kept workers employed during the unprecedented economic downturn following the COVID-19 outbreak. But ERC claims have faced processing delays that have now pushed many non-profits and small businesses in Massachusetts to their breaking point,” Markey and Warren wrote in their letter to IRS Commissioner Danny Werfel.
They added that while they support the agency’s effort to prevent improper payments, both the slow pace of review and the moratorium have caused significant delays and hardship for those with legitimate claims.
You also might find these items of interest:
- 5 new warning signs your ERC claim might be wrong
- 50,000 ERC payments to go out in September, says IRS
- Signs you should consider withdrawing your employee retention tax credit claim
Advertisements
🌟 Explore Prime for Young Adults 🌟
The text link above is an affiliate ad. If you click through and then buy a product, I receive a commission.
