The IRS recently identified roughly $86 billion in unsupported claims in about one million filings for the Employee Retention Credit. This initiative aims to maintain employee retention amid COVID-related shutdowns, but it’s inadvertently become a platform for fraudulent activities, thus harming small businesses. The situation stresses the urgency of enhancing fraud prevention measures within the IRS’s systems.
The rampant fraudulent activities on this platform not only pose threats to the integrity of these businesses but also their existence during such challenging times. Therefore, securing the Retention Credit from exploitation while making sure it serves its primary purpose is paramount.
Preliminary analysis reveals that between 10% and 20% of the reviewed applications contain recognisable errors. It’s anticipated that the IRS will promptly dismiss a large portion of these erroneous filings. Furthermore, the IRS has flagged a significant 60% to 70% of tax returns as having a high propensity for inaccuracies.
Combatting fraudulent filings in retention credit
To address this, the IRS is planning more rigorous checks and audits to ensure these filings are correct and to promptly discover and rectify discrepancies.
Danny Werfel, IRS Commissioner, assures that these critical findings will prevent billions from being erroneously assigned, accelerating the processing of applications without complications. The IRS predicts it will begin processing valid applications soon, despite their surprising decision to halt the processing of new applications starting September 2023. They pledge to start processing all previously received valid applications in the near future. It is vital for applicants to stay updated regarding the IRS’s processing schedule for not missing any significant updates that could affect their application status.
For businesses wishing to cancel claim processing for any unresolved tax periods, the IRS provides a claim withdrawal procedure. This process allows businesses to proficiently manage their tax affairs. The IRS has detailed this procedure to ensure it is smooth and transparent, eliminating potential problems or delays. It’s paramount to review all steps thoroughly and adhere to the IRS guidelines.
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