On August 8, the Internal Revenue Service (IRS) announced it will again process 2021 Employee Retention Tax Credit (ERTC) claims. It says it has resolved many claims issues, so far resulting in 28,000 denials and many valid claim payments.

The IRS said it is now processing claims filed through January 31, 2024. The agency had put a hold on claims filed after September 14, 2023. IRS also said that going forward processing of ERTC claims will proceed at a quicker pace.

The agency has been beset by the complexity of the ERTC along with promoter-driven advertising—much of which, the IRS says, and Congress agrees, was fraudulent—urging businesses to file for the tax credit without much regard to whether a business meets the complex criteria associated with qualification for the ERTC. Some tax practitioners have reacted by noting that there are a lot of denials that were in error, something that the IRS acknowledges occurred in “something less than ten percent” of the total. The IRS said it will work with taxpayers whose claims were denied in error.

The ERTC, enacted during the coronavirus pandemic, is available on a quarter-by-quarter basis for 2020 and 2021. Businesses can still file an amended tax return for the ERTC for any quarter in 2021. The deadline for these new 2021 ERTC claims is April 2025. IRS says it is still getting 17,000 new claims for the ERTC each week. However, currently the IRS is not processing claims received after January 31, 2024.

Prospects: There is pending legislation (HR 7024), currently stalled in the Senate, that would ban new ERTC claims after January 31, 2024. That legislation also imposes stiff penalties on promoters and fraudulent ERTC claims. While it remains possible that the Senate will pass HR 7024 (which the House approved last January) prior to year-end, it appears that the bill could be blocked until at least 2025, if not permanently.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.