IRS Mails Employee Retention Credit (ERC) Letters

The ERC is a refundable tax credit for businesses that continued paying employees during the pandemic while their business operations were either fully or partially suspended due to a government order, or for businesses that had a significant decline in gross receipts during the eligibility periods.
 
After a review this fall, IRS determined that a large number of taxpayers claiming the ERC did not meet the basic eligibility criteria. Starting this week, approximately 20,000 taxpayers began receiving Letter 105 C, Claim Disallowed, notifying them of their disallowed ERC claims.
 
These letters are being sent to taxpayers who are ineligible for the ERC either because their entity did not exist or because they did not have employees for the period when the credit was claimed.
 
IRS’s ERC compliance effort includes a withdrawal program for those with pending claims who realize they may have filed an inaccurate tax return. Later this month, IRS will also launch a separate voluntary disclosure program, allowing those who received questionable ERC payments to avoid future IRS action.
 
IRS will send more letters in the near future, including both disallowance letters and letters seeking the return of funds erroneously claimed and received. Get details here.