IRS Cracks Down on 20,000 Improper COVID Tax Credit Claims

The Internal Revenue Service (IRS) is sending over 20,000 letters to taxpayers notifying them of disallowed Employee Retention Credit (ERC) claims, targeting entities that did not exist or did not have paid employees during the eligibility period. This is part of the IRS's efforts to combat misleading marketing campaigns that have targeted small businesses and organizations. The IRS is also launching a voluntary disclosure program for those who received questionable payments to avoid future IRS action. The disallowance letters aim to protect taxpayers from audits, penalties, and interest, prevent incorrect refunds from going to ERC promoters, and save IRS resources. Taxpayers can respond with supporting documentation or file an administrative appeal if they disagree with the disallowance. The IRS is also accepting requests to withdraw pending ERC claims to avoid repayment, interest, and penalties.