The IRS has recently sent over 20,000 letters to taxpayers to disallow their Employee Retention Credit (ERC) claims.  This first wave of letters targeted taxpayers who did not exist or had no paid employees during the eligibility period for this COVID credit.  If the taxpayers disagree with this determination, an appeal can be filed providing supporting documentation.

This is the first wave of letters as part of an IRS campaign to curb the abuse by third-party processors through misleading marketing campaigns.  The next wave of letters will be aimed at disallowing ERC claims already processed and paid, requesting the funds be returned to the IRS.

In addition to the moratorium in place for processing any new ERC claims, the IRS will unveil a voluntary disclosure program allowing those taxpayers who received questionable payments to come forward to avoid any future IRS action.  At this time, this program has not yet been put in place.

As more information becomes available regarding the ERC, we will let you know.  If you have any questions regarding the disallowance of the ERC, please reach out to your tax professional.