Welcome to the Tax Insights Podcast, where we break down complex tax topics into bite-sized how-tos. In this episode, Jeff Dvorachek provides a crucial update on the Employee Retention Credit, highlighting the IRS’s new phase in processing and the current backlog of claims. Let’s dive in!
On today’s episode of Tax Insights, Jeff discusses the latest updates on the Employee Retention Credit. He explains the current state of ERC claims and what businesses need to know as the IRS moves to the next processing phase. Jeff breaks down key statistics and crucial considerations for those waiting on their ERC claims. Tune in for the most recent ERC updates.
Host: Today we’re talking about the ERC, the Employee Retention Credit. We’ve talked about this in the past, but there’s some updates that we want to share with our listeners.
Jeff: Right, because the IRS has just announced that they’re going into the next phase of their ERC work. If you remember, the ERC has been around for a while, but the IRS ended up getting overwhelmed with how many claims they received. So in September of last year, they placed a moratorium on any new claims so they could focus on all those old claims. Now, they were doing a pretty good job of getting ERC out in a relatively fast manner, but now it’s really slowed down. Since September, they’ve only processed about 28,000 claims and have disallowed about 14,000 claims. That’s since September, and their backlog, Terry, is currently at 1.4 million claims, so there’s a lot of work for the IRS to do.
Host: Unbelievable. Let’s talk about high risk and low risk and things like that.
Jeff: Yeah, perfect. The IRS has told us that about 10 to 20% are in the highest risk group, and those are the ones that are just going to get thrown out because there’s just no way those should have qualified. There’s about 60 to 70% in the middle that the IRS considers to be at an unacceptable level of risk, so they’re going to do a bunch of additional analysis on those. Then that remaining 10 to 20% are legitimate claims, and they’re trying to process those as quickly as they can.
Host: Yeah, that is a ton of claims for them to go through. I’m just kind of curious, how are they going to be able to go through all those claims? I mean, it feels like that’s going to take forever.
Jeff: I think it’s going to take a long time, Terry, which is why the IRS, when they said they were going to this next phase, they really said patience is needed by people who have actually submitted these claims. They should not do anything—don’t call the IRS, don’t do anything—because you’re not going to be able to get any information. Your claim is just waiting in a queue to be processed. So, nothing you can do at this point. Yeah, just kind of hold tight.
Host: Yeah, have patience. I know that’s one thing that many Americans don’t always have since we live in an instant gratification society, but patience is a must when we’re talking about this because, as you said, Jeff, there are a ton of claims for them to go through.
Jeff: There is. And you know with this new notice that came out, the IRS still said that there are still promoters—these groups that come in and process a whole bunch of claims that probably shouldn’t be eligible—they’re still out there. So watch out for those promoters too.
Host: So, let me ask you, Jeff, what’s next? I mean, is it literally just sit and be patient and do nothing, or is there anything that you can do?
Jeff: You know, as much as it frustrates people, Terry, that’s the answer. All you can do is wait at this point because you can call the IRS, we can call the IRS, and all they’ll say is, “Yes, we received your claim. It’s being worked on.” That’s all they’ll know.
Host: Jeff, a lot of great information. How do our listeners reach out to you over at Hawkins Ash?
Jeff: I would go right to our website, which is HawkinsAsh.CPA, go to the CPA-HQ section,
