Disallowance Letters on ERTC Claims Coming This Week
The IRS announced just last week that disallowance letters are on their way to more than 20,000 claimants who filed for the employee retention credit.
A moratorium was put in place for any future ERTC claims just a few short months ago after the IRS said it had received millions of claims that it believed were fraudulent after aggressive marketing by ERTC “pop up shops” pushing the credits to clients.
Through most of 2023, many of us received numerous calls on a weekly basis from spammy phone numbers claiming to be able to get us thousands back in unclaimed tax credits. ERTC “providers” were popping up at industry trade shows nationwide pushing the credits to business owners and claiming to be able to get them huge refunds despite what their tax accountants were telling them.
The aggressive marketing tactics resulted in the IRS putting a complete stop to claims being filed while the backlog was sifted through with more scrutiny. Businesses who filed in the later part of 2023 were told to expect long wait times in their forms being processed as a unpaid claims were now going to be subjected to a more intense review process.
This week, businesses will begin receiving Letter 105 C, Claim Disallowed notices for those claims that were filed when either the business entity did not exist during the eligible period, or the business did not have any employees. The IRS was clear that this was just the first round of notices, and they are meant to help taxpayers from facing future penalties for filing fraudulent claims.
Taxpayers who disagree with the disallowance will have an administrative process to be able to file an appeal.
In addition to the disallowance notices, there will be coming a remediation program to allow taxpayers who filed ineligible or fraudulent claims to elect to withdraw their claims without the fear of penalty. The IRS is also working on a program to allow taxpayers to pay back fraudulent received funds if they already received payment on an ineligible claim.
These steps have highlighted the sheer magnitude of fraud within the program and unfortunately have left many small businesses who truly are owed refunds, in a position to potentially wait over a year to ever seen those monies.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and providing strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.