Saturday, July 6, 2024

IRS Sees Fraud Risk for ‘Vast Majority’ of Covid Credit Claims; IRS to Reject Billions of Dollars in ‘improper’ Pandemic-Era Small Business Tax Credit claims , and other C-Virus related stories

Photo: Andrew Harrer/Bloomberg via Getty Images 
IRS Sees Fraud Risk for ‘Vast Majority’ of Covid Credit Claims:
The IRS will deny tens of thousands more pandemic-era employee credit claims it deems potentially fraudulent in the coming weeks, as it remains in a holding pattern for processing new claims, the agency said Thursday.
The update follows months of fraud surveillance at the agency on the employee retention tax credit, created to help struggling businesses keep their doors open and employees on the payroll during the Covid-19 pandemic. The credit became enmeshed in fraud, with third-party companies encouraging taxpayers to claim it when they didn’t qualify.
“We’re seeing clear indicators that the vast majority, at least 70% of the ERC claims currently awaiting processing have red flags about their accuracy,” IRS Commissioner Danny Werfel said during a press call Thursday.
In September, the IRS halted processing new claims and slowed processing those made before the moratorium. The agency initially said it anticipated lifting the pause in late spring but it is still sifting through its backlog, leaving many businesses and nonprofits without their refunds for an unknown period of time. Since the pause, the IRS processed 28,000 claims worth $2.2 billion and disallowed more than 14,000 claims worth over $1 billion, the agency said Thursday.
The IRS’s current backlog of claims sits at 1.4 million. After the processing pause, the agency was receiving claims at a rate of more than 17,000 a week.
“We worry that ending the moratorium might trigger a renewed marketing push by aggressive promoters that could lead to a new round of improper claims, that would be a bad result for taxpayers and tax administration,” Werfel said. “By continuing the moratorium, we will use this time to consult with Congress and seek additional help from them on the ERC program.”
The IRS is asking Congress to close the ERC program to additional applications and extend the statute of limitations to allow the agency more time to pursue improper claims, Werfel said. These changes are included in a stalled House-passed tax bill, which has dim prospects because Senate Republicans are largely opposed. --->READ MORE HERE
Ting Shen | Bloomberg | Getty Images
IRS to reject billions of dollars in ‘improper’ pandemic-era small business tax credit claims
The IRS will deny billions of dollars’ worth of claims for a pandemic-era tax break while working to process lower-risk filings, the agency said on Thursday afternoon.
Enacted to support small businesses during the Covid-19 pandemic, the employee retention credit, or ERC, is worth thousands of dollars per eligible employee. However, the agency stopped processing new filings in September amid a surge of “questionable claims,” the IRS said in a news release.
The agency added that it will extend that moratorium.
After investigating more than 1 million claims worth roughly $86 billion, the IRS said in the release that it identified 10% to 20% of the highest-risk filings, and “tens of thousands” will be rejected in the coming weeks, according to the agency. Another 60% to 70% of claims with an “unacceptable level of risk” will be further examined, the IRS said.
“We will now use this information to deny billions of dollars in clearly improper claims and begin additional work to issue payments to help taxpayers without any red flags on their claims,” IRS Commissioner Danny Werfel said in a statement.
During the ERC review period, the agency processed 28,000 claims received before September 2023 worth $2.2 billion and disallowed more than 14,000 claims worth $1 billion, according to the release.
Overall, compliance efforts for erroneous ERC claims have topped more than $2 billion since last fall, the IRS said.
“This is one of the most complex credits the IRS has administered, and we continue to ask taxpayers for patience as we unravel this complex process,” Werfel said. “Ultimately, this period will help us protect taxpayers against improper payouts that flooded the system and get checks to those truly eligible.” --->READ MORE HERE
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