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W&M members want ERC backlog answers from IRS

October 5, 2023
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Businesses who applied for the Employee Retention Credit (ERC) aren’t the only ones upset with the Internal Revenue Service’s handling of claims.

So are the Republican leaders of the House Ways and Means Committee.

Rep. Jason Smith (R-Missouri), chairman of the tax-writing panel, and Rep. David Schweikert (R-Arizona), chair of the W&M Oversight Subcommittee, this week wrote to IRS Commissioner Daniel Werfel demanding an update on the ERC processing backlog.

The ERC, also sometimes referred to as the Employee Retention Tax Credit or ERTC, was created during the COVID-19 pandemic to help businesses and their employees who were struggling due to closures and the accompanying economic slowdown.

Since then, some ERC claims have been submitted on behalf of businesses by unscrupulous claim promoters. Those fake filings prompted the IRS to halt processing of ERC filings on Sept. 14.

Looking for a progress report: Smith and Schweiker said in their Oct. 3 letter they are concerned about legitimate ERC claims being sidelined.

They want Werfel to provide the committee with the IRS’ plan to resolve the backlog of unprocessed ERC claims, while simultaneously preventing fraud, and ensuring that legitimate claims are paid to eligible businesses in a timely manner.

“While we appreciate efforts to protect taxpayers from scams, the announced moratorium will exacerbate wait times, […and] worsen the existing backlog of claims,” the Ways and Means members wrote.

They also chided Werfel for the IRS’ lack of engagement with Congress on crafting potential legislative solutions for the ERC, which Smith and Schweikert described as a program with “numerous public issues.”

Those issues have been discussed during Congressional and other hearings earlier this year, which the lawmakers cited in their letter. Shady ERC mills that capitalize on the complexity of the tax break also made the IRS’ own Dirty Dozen tax scam list this year.

Questions for the commish: The two tax committee members asked for a response from Werfel on 10 ERC issues, including —

  • how the IRS will tackle the level of fraud within the program during its current moratorium on the processing of new claims;
  • what legislative proposals it would like Congress to take to address fraud within the program generally;
  • any specific questions regarding the speed at which the agency expects to process existing claims under the current moratorium, and how it will ensure it is done in a timely manner;
  • what data led the IRS to impose a moratorium;
  • the total amount of refunds processed to date; and
  • when it expects to entirely eliminate the ERC claims backlog.

Don’t fall for ERC cons: Finally, while we wait for Capitol Hill and the IRS to come up with a mutually satisfying plan to stop ERC scams and pay legitimate claims, business owners need to stay alert for con artists pushing fake claims.

ERC claim scam warning_IRS graphic

Be on the lookout for the warning signs of misleading ERC scams. They include —

  • Unsolicited calls or advertisements mentioning an “easy application process.”
  • Statements that the promoter or company can determine ERC eligibility within minutes.
  • Aggressive claims that the tax break is easy to claim, when it actually is a complex credit that requires careful review before applying.

And definitely don’t fall for ERC promoter promises that there’s nothing to lose by submitting a claim. That’s not true.

If the IRS finds your company improperly received the credit, you’ll have to repay it, along with substantial interest and penalties.

You also might find these items of interest:

 

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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