Danny Werfel, the Commissioner of the IRS (Internal Revenue Service), on Thursday, ordered the agency to stop the processing of new claims for employee retention credits (ERC). The government created the ERC to provide support to small businesses during the COVID-19 pandemic. The ERC for each employee can be worth thousands.
The promise of ERC has led to a rise of various specialist firms who are falsely promising businesses that they have qualified for the complicated tax break that ERC offers.
According to Danny Werfel, the agency must immediately stop processing new claims for the small business tax break that ERC offers. He is of the opinion that this step is to protect filters from a “surge of questionable claims.”
On a press call, Werfel informed reporters –
“This great program to help small businesses has been overtaken by aggressive promoters. […] It was not designed to be a gravy train for promoters, flooding the IRS with eligible applications that slow down work on ERC and other important matters for taxpayers.”
Werfel also said that the IRS is getting more alarmed by the way in which unscrupulous actors scamming honest small business owners. The growing evidence of questionable claims is getting intolerable for the tax agency.
Over the course of the program, the IRS has received almost 3.6 million claims. Furthermore, the current inventory received more than 600,000 claims in the last ninety days.
As per the data released on 1 July 2023, the criminal investigation division of the IRS processed 252 investigations. These investigations involved fraudulent ERC claims of more than $2.8 billion. Till now, fifteen of those investigations resulted in federal charges, out of which six resulted in convictions.
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