Delays and Backlogs in ERTC Processing

In a pivotal tax credit letter dated October 3, 2023, the House of Representatives Ways and Means Committee addressed deep concerns to IRS Commissioner Daniel Werfel. The concern is regarding the Employee Retention Tax Credit (ERTC). The focus was on the persistent backlog of unprocessed claims. This is following the IRS’s announcement of a ‘moratorium’ on September 14, 2023. It is important to resolve this issue urgently. Which will prevent fraud and ensureng prompt disbursement of entitled ERTC credits to eligible businesses. This article explores the contents of the letter, shedding light on the critical need for swift action.

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Exacerbating Delays and Backlogs:

The committee highlighted adverse effects resulting from the IRS’s decision to impose a moratorium on processing new ERTC claims until 2024. However, acknowledging the intent to combat fraud, we raised concerns. Potential problems include prolonged delays, worsened backlogs, and delayed payments to legitimate claimants. Given the existing extensive backlog of tax credit claims, uncertainties linger.
These uncertainties center on measures to address processing efficiency and fraud prevention during the moratorium. To navigate these concerns, careful consideration of potential solutions is essential. Talk with an ERC Expert

Misleading Statements by the IRS About the Tax Credit Backlog:

A significant portion of the committee’s concerns centers on misleading statements made by the IRS regarding the resolution of the tax credit backlog. The letter pointed out contradictory information provided by the IRS. This creates confusion, eroding trust, and fostering an environment conducive to fraud. The lack of transparency in communication from the IRS further exacerbates problems in the ERTC program.

employee retention tax credit

Fraud and Misleading Practices:

The committee drew attention to extensive fraud within the ERTC program. The Ways and Means Subcommittee on Oversight conducted a hearing titled “The Employee Retention Tax Credit Experience: Confusion, Delays, and Fraud” on July 27, 2023, to discuss this information. It shed light on both the backlog of tax credit claims at the IRS and the deceptive practices of third-party entities engaged in fraudulent solicitations. These entities exploit the complexity of the ERTC program, making false promises of eligibility and substantial refunds.

Committee’s Call for Tax Credit Accountability and Solutions:

The House of Representatives Ways and Means Committee’s letter to IRS Commissioner Werfel raises significant concerns about the IRS’s processing of ERTC claims. The committee’s demand for answers to ten specific questions is a critical call for accountability and effective solutions. Taxpayers and businesses are awaiting the IRS’s responses. These will address the concerns and are paramount for the successful operation of the ERTC program. More importantly, this concerns the financial well-being of eligible businesses.

Full List of 10 the 10 Questions:

  1. What steps will the IRS take to ensure legitimate ERTC claims filed before the moratorium beginning September 14, 2023, are processed in a reasonable amount of time?
  2. How fast will existing ERTC claims be processed under this new moratorium?
  3. What data points led you to implement the recently announced moratorium?
  4. Which is the most up-to-date total dollar figure of tax credit refunds that have been processed?
  5. What legislative proposal is the IRS considering to address ERTC fraud as referenced in your July 25, 2023, remarks, and when do you plan to share this with Congress for consideration?
  6. Is the IRS considering the creation of a “status check” portal for applicants to receive up-to-date information regarding their claims? Why or why not?
  7. What steps will be taken to expedite processing times of legitimate ERTC claims filed during the moratorium, which the IRS will begin processing no earlier than January 1, 2024?
  8. What fraud prevention measures will the IRS take during the moratorium to be better equipped to combat fraud when processing new claims begins in 2024?
  9. When does the IRS expect the current backlog to be eliminated in its entirety?
  10. How will the IRS ensure that taxpayers with legitimate ERTC claims receive their entitled credits promptly despite the ongoing challenges and backlog?

Read the whole letter here.

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Frequently Asked Questions (FAQs) About Employee Retention Tax Credit (ERTC)

How can businesses determine their eligibility for the Employee Retention Tax Credit during the moratorium period?

Eligibility criteria for the Employee Retention Tax Credit remain unchanged during the moratorium. To assess eligibility, businesses should consider factors such as a significant decline in gross receipts or being subject to a full or partial suspension of operations due to government orders. Consult IRS guidelines for detailed information.

Are there specific industries more prone to fraudulent solicitations related to ERTC, and how can businesses protect themselves?

Certain industries may be more susceptible to fraudulent ERTC solicitations. Vigilance is crucial. Businesses should rely on official IRS communications, avoid third-party promises that seem too good to be true, and report any suspicious activity to the IRS Fraud Detection Hotline.

Is there a streamlined process for tracking the status of ERTC claims during the moratorium, and what steps can businesses take for faster processing?

The IRS is considering the creation of a “status check” portal. In the meantime, businesses can proactively ensure faster processing by filing accurate and complete information, keeping abreast of IRS announcements, and being prepared to provide any additional documentation promptly upon request.

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The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.