The Internal Revenue Service (IRS) has announced that its compliance efforts have protected over $1 billion in revenue since last fall, focusing on erroneous Employee Retention Credit (ERC) claims. IRS Commissioner Danny Werfel expressed concern over the widespread abuse of these claims, which have negatively impacted small businesses.
IRS ERC initiatives have been instrumental in protecting this revenue. These initiatives were launched following the IRS's decision to impose a processing moratorium on new claims from September 14, 2023. The initiatives include the special ERC Voluntary Disclosure Program (VDP), which has yielded over $225 million from more than 500 taxpayers, and the ongoing claim withdrawal process, which has led to 1,800 entities withdrawing $251 million. An additional $3 billion in claims is currently under review by the IRS Criminal Investigation.
The IRS has also identified over 12,000 entities that filed more than 22,000 improper claims, resulting in $572 million in assessments. The IRS plans to continue this work and anticipates that the amount protected by these initiatives will increase as more voluntary disclosures are processed, more claims are withdrawn, and additional compliance work is completed.
Although the VDP was suspended on March 22, 2024, the program may be reopened in the future, depending on whether Congress extends the statute of limitations for ERC claims. The Treasury Department has proposed extending the statute of limitations to give the IRS more time to address unscrupulous ERC claims.
The IRS is also intensifying its audits and investigations into ERC claims. As of February 29, 2024, the IRS Criminal Investigation has initiated more than 386 criminal cases, with claims worth almost $3 billion. Twenty-five investigations have resulted in federal charges, with 12 convictions and six sentencings with an average sentence of 24 months. The IRS will continue its civil and criminal enforcement efforts against unscrupulous promoters and preparers.
Originally published 04 April 2024
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