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IRS Announces Withdrawal or Correction Process for Suspect Claims for Employee Retention Credit

Thursday, November 2, 2023 - 2:00PM

The Internal Revenue Service (IRS) recently updated its frequently asked questions document related to refund claims for the employee retention tax credit (ERC) to outline procedures for employers to withdraw suspect claims. The ERC was enacted in response to the COVID-19 pandemic as relief for employers in the form of refunds of employer payroll taxes for up to $26,000 per eligible employee. Qualification is complex: At a high level, employers may be eligible to claim the credit if they suffered a significant decline in gross receipts in 2020 or during the first three quarters of 2021 as measured against quarters in 2019, or if they sustained a full or partial suspension of operations due to a government-issued order aimed at mitigating the spread of COVID-19. The IRS says it believes that many employers filed claims without fully vetting their eligibility, potentially based on faulty advice from advisors who might have been compensated on a commission basis.

Novogradac has a systematic approach to evaluate employer eligibility and does not provide these services on a commission basis. Novogradac professionals can assist taxpayers who claimed the ERC evaluate whether the taxpayer’s eligibility and calculations are appropriately documented and supported. Novogradac can also assist employers who have not yet determined their eligibility for filing a claim and need assistance to ascertain the magnitude of any potential refunds. For more information, see the Notes from Novogradac blog post on this topic or contact Tom Boman or Megan Murphy for assistance.

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