The Internal Revenue Service announced on Thursday that a review of 1 million claims for the Employee Retention Credit (ERC) totaling $86 billion has revealed that the majority of these claims are at risk of being improper. The ERC was established to assist businesses in retaining employees during the pandemic-related shutdowns, but it has unfortunately become a target for fraudulent activities.
Due to the complex eligibility criteria of the ERC, scammers have been able to exploit the system by offering assistance to small businesses in applying for the credit for a fee, even if they do not meet the requirements. The IRS has identified that approximately 10% to 20% of the 1 million claims exhibit clear signs of being erroneous, with tens of thousands expected to be denied in the coming weeks. Additionally, 60% to 70% of the claims show an unacceptable risk of being improper and will undergo further evaluation.
