IRS Disallows Over 20,000 Employee Retention Credit Claims

The IRS is taking action against ineligible taxpayers, introducing a withdrawal option and planning to unveil a voluntary disclosure program.

The IRS is sending more than 20,000 letters to taxpayers notifying them that their Employee Retention Credit (ERC) claims have been disallowed. These letters are targeted to taxpayers the IRS believes are not eligible and who have applied for, but have not yet received the credit.
The IRS introduced a new withdrawal option in October, allowing certain employers that have filed an ERC claim but have not received a refund to withdraw their submission and avoid future repayment, interest, and penalties.
Later this month, the IRS intends to unveil a separate voluntary disclosure program which will allow those taxpayers who received questionable payments to make a disclosure and avoid future IRS action.
Taxpayers who are ineligible for the credit will receive Letter 105 C, Claim Disallowed. Taxpayers who receive this letter fall into two categories: their entity did not exist during the ERC timeframe or they did not have employees for the time period when the credit was claimed.
The IRS says that sending out the letters will help ineligible taxpayers avoid audits, repayment, penalties and interest, as well as protect taxpayers by preventing an incorrect refund from going to an ERC promoter.