Taxpayer advocate: Unprocessed ERC claims could total 1 million at year end

The IRS could have about 1 million employee retention credit (ERC) claims remaining to process by the end of the year, the national taxpayer advocate said Tuesday at the AICPA & CIMA National Tax Conference.

“That is a huge lift,” Erin Collins said. “This is not a five-minute exercise.”

And the number likely will increase until April 15, the deadline for ERC claims related to the 2021 fiscal year, she said.  

“So those numbers are continuing to rise, and [the] IRS has to deal with it,” she said. “We’ve made various suggestions and recommendations, but, as you can see, they aren’t moving fast.”

To counter a flood of claims resulting from the work of ERC promoters, the IRS announced last fall a moratorium on processing claims submitted after Sept. 14, 2023, to give the agency time to digitize information on the large study group of ERC claims. In August, the IRS said it would process claims filed between Sept. 14, 2023, and Jan. 31, 2024.

Collins said she expected the IRS would process another small tranche of claims before the end of the year.

ERC background

The ERC was designed to help certain businesses continue paying employees during the COVID-19 pandemic while their operations were either fully or partially suspended due to a government order or had a significant decline in gross receipts during the eligibility periods. It was generally available to eligible businesses from March 31, 2020, to Sept. 30, 2021, and to Dec. 31, 2021, for recovery startup businesses.

Fraud vs. hardship

While Collins said she thought some ERC claims are aggressive or involve taxpayers who were hoodwinked by promoters, she said she does not agree with the IRS that fraud is rampant. And she said it is imperative that the IRS pay all legitimate claims.

The claims involve “a lot of good taxpayers in there that are entitled to this money,” she said. And the Taxpayer Advocate Service, which Collins heads, can get involved when a businessperson has a hardship, she said, such as a client who needs to pay their rent or car payment or needs money for food.

“We get a lot of people reaching out to us and saying, ‘I mortgaged my home because I thought I was going to get this ERC money so I could keep my business afloat. I need to pay this off. The interest is killing me.’ Or ‘I paid my employees out of my assets to keep them on the roll. I need this money back.’ I’ve had people saying they’re possibly going to shut down. They’re going to have these challenges so we are trying to help those individuals, and it is not as fast as I would like.”

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.