Protect Taxpayer Rights in Employee Retention Credit Claims

Activity 1: Advocate for the IRS to continue incentivizing taxpayers to voluntarily withdraw ineligible pending ERC claims; return erroneous ERC claim refunds; and for taxpayers who received their ERC payments, file the required amended business returns related to the ERC benefits or offset the ERC pending claims by the benefits on the required amended business returns.

Activity 2: Recommend the IRS post general updates about the volume of the ERC claims backlog and estimated processing times.

Activity 3: Continue to refer ERC cases for the IRS to prioritize when the taxpayer has a significant hardship and qualifies for TAS assistance.

Activity 4: Work with the IRS to ensure it offers clear explanations and transparency when it denies an ERC claim by providing taxpayers with a written explanation consistent with the taxpayer right to be informed and clearly details the basis for denial so taxpayers may properly consider whether to exercise their right to appeal an IRS decision in an independent forum or pursue litigation.

The Taxpayer Advocate Service (TAS) updated several Employee Retention Credit (ERC) TAS Tax Tips on the TAS website with current information advocating for taxpayers to review their ERC claims to verify they are eligible and explaining available options if they determine they are not eligible for the credit.

Additionally, the 2024 National Taxpayer Advocate Annual Report to Congress includes administrative recommendations for administering claims. One for the IRS to provide regular updates on IRS.gov on the processing of outstanding Employee Retention Credit (ERC) claims and include specific anticipated timeframes; and a second recommendation for the IRS to provide clear Disallowance explanations.

• Daily – Case Advocacy reviewed cases to determine if elevation to Taxpayer Services was appropriate.
• Weekly – Case Advocacy elevated significant hardship ERC claims to IRS Taxpayer Services for prioritization.

A total of eleven lists, consisting of over 450 ERC claims, were submitted to IRS for prioritization.

TAS spoke with the IRS’s Employee Retention Credit (ERC) program team regarding statute issues surrounding amending business returns. IRS finalized and published FAQs regarding the requirement to amend business returns for wages included in the calculation of ERC credits claimed on the business’ payroll return.

TAS held several conversations with the IRS’s ERC program team advocating for the following:

• More transparency on the status of processing outstanding ERC claim; and
• Clearer explanations and transparency when the IRS denies a claim.

IRS has made several updates to the irs.gov landing page explaining the disallowance process. Based on other TAS inquiries, IRS is in the process of producing a separate landing page with guidance on responding to partial claim disallowance notices.

TAS updated the TAS Employee Retention Credit (ERC) Tax Tip with current information on the withdrawal program to encourage businesses to verify they qualify and withdraw their claim if they determine they do not.

The National Taxpayer Advocate released the June Report to Congress requesting that the IRS Complete processing of all Employee Retention Credit claims and ensure taxpayer rights are protected.

The National Taxpayer Advocate released a blog advocating for IRS to prioritize resolution, communication, and taxpayer protections. TAS had several discussions and worked numerous issues surrounding the ERC disallowance notices program, including the document review process and the appeals process; advocating to reduce taxpayer burden and protect taxpayer rights.

TAS will continue to meet with the IRS to develop plans and strategies to move forward.