IRS Employee Retention Credit compliance effort tops $1 billion threshold since fall

WASHINGTON — The Internal Revenue Service announced today that compliance efforts around erroneous Employee Retention Credit (ERC) claims have topped more than $1 billion so far since last fall as work continues on a number of efforts to counter questionable claims pushed by aggressive marketing, including an aggressive push on claims made for 2021.

“The IRS has made important progress in our compliance efforts protecting more than $1 billion in revenue in just six months, but we remain deeply concerned about widespread abuse involving these claims that have harmed small businesses,” said IRS Commissioner Danny Werfel. “We are encouraged by the results so far of our initiatives designed to help misled businesses, and the IRS will continue our broader compliance work given the aggressive marketing we’ve seen with this credit.”

Three IRS ERC initiatives have protected more than $1 billion just since the IRS instituted a processing moratorium on new claims beginning Sept. 14, 2023. An additional $3 billion in claims is being reviewed by IRS Criminal Investigation. Key figures from the three programs show:

• The special ERC Voluntary Disclosure Program (VDP), has yielded more than $225 million from over 500 taxpayers with another 800 submissions still being processed and more being filed at the last minute before the deadline.

• The ongoing claim withdrawal process for those with unprocessed ERC claims has led to 1,800 entities withdrawing $251 million.

• The IRS has determined that more than 12,000 entities filed over 22,000 claims that were improper and resulted in $572 million in assessments. The IRS is continuing this work, and more activity is planned in this – and other areas in the months ahead.

The amount protected by these IRS ERC initiatives will continue to grow as additional voluntary disclosures are processed, additional claims are withdrawn and additional compliance work is completed. The statistics above are through March 15.

These ERC initiatives are working to protect businesses from ERC promoters that shared misleading information or misrepresented eligibility rules and lured businesses to apply for the ERC when they didn’t qualify. The ERC program began as a critical effort to help businesses during the pandemic, but the program later became the target of aggressive marketing well after the pandemic ended. Some promoter groups may have called the credit by another name, such as a grant, business stimulus payment, government relief or other names besides ERC or Employee Retention Tax Credit (ERTC).

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IR-2024-78