September 7, 2023

The Internal Revenue Service (IRS) has slowed the payment of refunds to employers for the Employee Retention Credit (ERC) as the agency struggles to combat what it says are fraudulent and overstated claims for the credit. The IRS explained that it is “deeply concerned about small businesses being scammed and dubious ERC claims being submitted amid aggressive marketing to businesses” and said that it slowed their processing of claims to “guard against fraudulent or incorrect submissions” as the agency updates procedures to protect small businesses and taxpayers. The IRS is reportedly concerned about a cottage industry of employee-retention tax-credit advisers that has emerged following enactment of the ERC that encourages employers to seek the ERC, advertises heavily, and persistently contact employers. The IRS has reportedly paid $220 billion in ERC refunds through July 2023, roughly triple the original congressional estimates for the program.

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