IRS Says 'Vast Majority' of 1 Million Pandemic-Era Credit Claims Show a Risk of Being Improper

Summary

Associated Press article published 06/20/2024 on Politico, IRS says 'vast majority' of 1 million pandemic-era credit claims show a risk of being improper. It reports that the IRS said a review of 1 million Employee Retention Credit claims representing $86 billion shows the vast majority are at risk of being improper. It reports that about 10 percent to 20 percent of the claims show clear signs of being erroneous and will be denied, that another 60 percent to 70 percent show an unacceptable risk and will be further evaluated, and that about 10 percent to 20 percent show low risk. It quotes IRS Commissioner Danny Werfel and states that the moratorium on claims submitted after Sept. 14, 2023 will continue.

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# IRS says ‘vast majority’ of 1 million pandemic-era credit claims show a risk of being improper

Tens of thousands of claims showing "clear signs of being erroneous" will be denied in coming weeks, the agency said.

![Image 1: A sign outside the Internal Revenue Service building is seen.](https://www.politico.com/dims4/default/resize/630/quality/90/format/webp?url=https%3A%2F%2Fstatic.politico.com%2F2c%2Fc3%2Ff01c0ffd4e218908436dc1c49bf3%2Ftax-audits-60767.jpg)

About 10 percent to 20 percent show low risk, and the IRS will begin processing those claims. The first payments for that group should begin later this summer. | Patrick Semansky/AP

By Associated Press
06/20/2024 07:23 PM EDT

NEW YORK — The Internal Revenue Service said Thursday [a review](https://apnews.com/article/small-business-employee-retention-credit-irs-a2560534540931a2f8c007275bd65d01) of 1 million claims for the Employee Retention Credit representing $86 billion shows the “vast majority” are at risk of being improper.

The ERC was designed to help businesses retain employees during pandemic-era shutdowns, but it [quickly became a magnet for fraud](https://apnews.com/article/irs-covid-business-tax-credit-fraud-congress-226ea420bdb2c3a06e135d47ca140a8d). Its complex eligibility rules allowed scammers to target small businesses, offering help applying for the ERC for a fee — even if they didn’t qualify.

About 10 percent to 20 percent of the 1 million claims show “clear signs of being erroneous,” and tens of thousands of those will be denied in coming weeks, the IRS said. Another 60 percent to 70 percent show an “unacceptable risk” of being improper and will be further evaluated.

“The completion of this review provided the IRS with new insight into risky Employee Retention Credit activity and confirmed widespread concerns about a large number of improper claims,” said IRS Commissioner Danny Werfel. “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.”

About 10 percent to 20 percent show low risk, and the IRS will begin processing those claims. The first payments for that group should begin later this summer.

The IRS [stopped processing new claims in September](https://apnews.com/article/small-business-fraud-erc-irs-161fb191d159548949d42a015910e9c2) and it said Thursday that the moratorium on ERC claims submitted after Sept. 14, 2023 will continue.

The IRS said businesses can pursue the [claim withdrawal process](https://www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim) if they need to ask the IRS not to process an ERC claim for any tax period that hasn’t been paid yet.

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