Thanks yet again, and as always, to Lisa Simpson from the AICPA Town Hall for her regular updates on what’s going on with Employee Retention Credit processing at the IRS. I can trust this team to make sure I’m getting the latest information, free from rumors and gossip, and that I’m able to both quell my clients’ concerns and also manage their expectations.
I had just been hearing some rumblings in one of my professional associations — someone had said, “seems inevitable that anyone who filed an ERC claim after September 2023 will need to file a lawsuit to get the claim paid,” and went on to suggest that it would be a great opportunity for a law firm, and wanted to know if we had referrals in this space.
First off, it made me nervous — our remaining ERC claims, all for deserving small business and non-profit clients of a colleague, worked really hard to make sure we had what we needed to submit their claims by January 31st, 2024, since there was pending legislation that might retroactively end the program after that date. They all were informed that it might be a year or more before they received the money, given the IRS moratorium — but certainly none of us expected to line the pockets of an attorney in order to get the claims paid out. And in fact, the claims were mostly small enough that my guess is most lawyers wouldn’t bother with them.
Secondly… it made me suspicious. On what basis was this guy saying a lawsuit would be “inevitable”? I attend every single AICPA Town Hall and hadn’t heard anyone suggest this. And what a sad thing to suggest it would be a “great opportunity” for a law firm — to specialize in making money off those desperate to finally receive what they and their accountants had already worked so hard to obtain.
As usual, I decided to quell those fears until the next AICPA Town Hall, and I’m so glad I did, as Lisa Simpson made ERC the first topic in her Technical Update. She explained the recent IRS news release that likely triggered the unfounded rumblings I was hearing, as well as referenced a new Journal of Accountancy article that delved deeper.
My takeaway was that: while 10-20% of claims are clearly fraudulent, and the IRS is in the process of denying them; and another 60-70% show an unacceptable level of risk and will be examined carefully — there are also between 10% and 20% of the claims show a low risk. The IRS “will begin judiciously processing” more of these claims, and, according to the release, expects some of these payments to be made later this summer.
To me, that’s all good news. It means they’re working through the piles and expediting the ones that have straightforward claims where the businesses played by the rules, processing the oldest ones first. The rest will be examined more critically, or in the case of blatant fraud, flat-out denied.
The one disappointing piece of information is that no claims submitted during the moratorium will be processed at this time. But at least we know the backlog is being cleared to make way for them. Since the moratorium was put in place, the IRS has received over 17,000 claims per week.
I’ve let my clients know that they shouldn’t budget for these dollars for at least another year, but that there’s no reason to presume they won’t eventually receive the claims that are due to them.
And yet again I learned that if something sounds sensational and suspicious… it might not be grounded in evidence and analysis. Rely only on your trusted advisors for the education and resources that will help you guide your small business clients. (And then provide links to those resources to the sensationalists who spread misinformation.)
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