Sandy K. Baruah President and Chief Executive Officer at Detroit Regional Chamber | Official website
Sandy K. Baruah President and Chief Executive Officer at Detroit Regional Chamber | Official website
The Employee Retention Credit (ERC) was a government program designed to prevent job losses during the COVID-19 pandemic. Initially underutilized due to its complexity, the IRS allowed for claims to continue being submitted, leading to an influx since 2021. This has resulted in a significant increase in pending claims and a total cost far exceeding initial estimates. The IRS is now facing a substantial backlog and is investigating potential fraud within the program.
In September 2023, the IRS intentionally began slowing down the processing of claims to identify suspect applications and determine which employer applications are legitimate. In June 2024, the IRS stated that 20% of the pending ERC applications were clearly unlawful claims and estimated that as many as 70% of applications have unacceptable levels of risk requiring intense scrutiny.
The agency is now starting to process more of the claims but does not foresee a quick resolution. Low-risk claims will be prioritized first. However, the IRS is currently being challenged in Arizona court regarding its ability to pause claim processing authorized by Congress.
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