Last month, the Internal Revenue Service (IRS) announced an extension of a pause on processing Employee Retention Credit (ERC) claims submitted after Sep. 14, 2023. The agency closely examined ERC claims in backlog and determined that 10-20% of claims were low-risk, 60-70% of claims had unacceptable risk, and 10-20% had high risk. I applaud the IRS’ prudent use of the increased funding from the Inflation Reduction Act to sift through invalid claims, identify low-risk claims, and perform a timely analysis of millions of ERC claims.
The IRS has said that it would “begin judiciously processing more” low-risk claims, with the first payments going out later in the summer. However, the already identified low-risk ERC claims, submitted by struggling small businesses, should be approved and paid now. Immediately approving and paying low-risk ERC applicants would greatly benefit the roughly 150,000-300,000 applicants who are still operating in a challenging economic environment.
