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IRS Plans To Review Pending ERC Claims “Slowly and Judiciously” In Light of Widespread Fraud

Offshore Account Update

Posted on June 14, 2024 |

In response to a lawsuit challenging the legality of the IRS' moratorium on processing new Employee Retention Credit (ERC) claims, the agency has stated that it still has more than 1.4 million pre-moratorium claims to review. In light of widespread fraud under the ERC program, the agency has also stated that it is reviewing these claims “slowly and judiciously” so that it can avoid paying as many fraudulent claims as possible. If you have a pending ERC claim (or are waiting to file an ERC claim), what does this mean for you? Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

Prosecuting ERC Fraud Remains a Top IRS Priority

The IRS' recent statements make clear that prosecuting ERC fraud remains one of its top priorities. As we recently discussed, the IRS is actively working alongside the U.S. Department of Justice (DOJ) to target Massachusetts businesses suspected of filing fraudulent ERC claims, and the DOJ is pursuing criminal charges when warranted.

For Massachusetts business owners who have filed ERC claims, this is cause for concern. Even if you filed a claim with no intention of breaking the law, your business’s ERC claim could still come under scrutiny. When evaluating ERC claims, the IRS is looking for various “red flags,” not all of which are necessarily indicative of fraud. Facing scrutiny from the IRS under any circumstances can be risky, and a careful defense can be critical for avoiding unnecessary consequences.

What if your business’s ERC claim may not be valid? In this scenario, a proactive approach is best. There are various options for remedying invalid ERC claims before the IRS has initiated an audit or investigation. Once the IRS initiates an audit or investigation, however, many of these options go off of the table—and the likelihood of facing adverse consequences can increase significantly.

What if You Need to File an ERC Claim?

Now, what if you are waiting to file an ERC claim with the IRS? While the IRS' moratorium is still in effect, business owners have options in this scenario as well. As explained in an article on Forbes.com summarizing the pending lawsuit against the IRS:

“[T]he government . . . contends that the moratorium has not harmed employers—they remain free to file refund suits in federal court, provided the statutory six-month waiting period has passed, and will receive interest on their claims if they are meritorious.”

While there are costs involved in filing a refund suit, doing so can be companies’ best option in some circumstances. If you have questions about filing a refund suit—or if you have concerns about your business’s ERC claim—you should talk to a Boston tax attorney as soon as possible.

Request a Confidential Consultation with Boston Tax Attorney Kevin E. Thorn

If you would like to speak with Boston tax attorney Kevin E. Thorn, we invite you to get in touch. Please call 617-692-2989 or contact us online to request a confidential consultation.

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