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IRS rejects 20,000 tax refund claims for worker retention credit score

IRS rejects 20,000 tax refund claims for worker retention credit score 

IRS Commissioner Daniel Werfel speaks throughout an IRS occasion on August 2, 2023 in McLean, Virginia.

Alex Wong | Getty Photographs

The IRS is sending greater than 20,000 rejection letters to taxpayers who wrongly claimed a pandemic-era tax break because the company continues its crackdown on “doubtful” filings.

Created to assist small companies throughout the Covid-19 pandemic, the worker retention credit score, or ERC, is value 1000’s of {dollars} per eligible worker. Nonetheless, the tax break sparked a wave of corporations pushing small companies to wrongly declare the credit score — and the company quickly stopped processing new filings in September amid a “surge of questionable claims.”

“With the aggressive advertising we noticed with this credit score, it isn’t shocking that we’re seeing claims that clearly fall exterior of the authorized necessities,” IRS Commissioner Danny Werfel stated in a press release Wednesday.

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Beginning this week, ineligible taxpayers will begin receiving copies of Letter 105 C for disallowed claims. Later this month, the IRS will unveil a “voluntary disclosure program” for taxpayers who wrongly claimed the credit score. The company is rejecting filings from entities that did not exist or did not have paid staff throughout the eligibility interval.

“The motion we’re taking as we speak is a part of an preliminary set of steps in our compliance work on this space,” Werfel stated. “Extra letters shall be going out within the close to future, together with each disallowance letters and letters looking for the return of funds erroneously claimed and acquired.”

The announcement comes lower than two months because the IRS unveiled a particular withdrawal course of for small companies that wrongly claimed the credit score to keep away from compensation, curiosity and penalties.

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