IRS Commissioner Daniel Werfel speaks throughout an IRS occasion in McLean, Virginia, on Aug. 2, 2023.
Alex Wong | Getty Photos
The IRS is sending greater than 20,000 rejection letters to taxpayers who wrongly claimed a pandemic-era tax break because the company continues its crackdown on “doubtful” filings.
Created to assist small companies throughout the Covid-19 pandemic, the worker retention credit score, or ERC, is price hundreds of {dollars} per eligible worker. Nevertheless, the tax break sparked a wave of corporations pushing small companies to wrongly declare the credit score — and the company briefly stopped processing new filings in September amid a “surge of questionable claims.”
“With the aggressive advertising and marketing we noticed with this credit score, it is not shocking that we’re seeing claims that clearly fall exterior of the authorized necessities,” IRS Commissioner Danny Werfel stated in an announcement Wednesday.
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Beginning this week, ineligible taxpayers will begin receiving copies of Letter 105 C for disallowed claims. Later this month, the IRS will unveil a “voluntary disclosure program” for taxpayers who wrongly claimed the credit score. The company is rejecting filings from entities that did not exist or did not have paid workers throughout the eligibility interval.
“The motion we’re taking at the moment is a part of an preliminary set of steps in our compliance work on this space,” Werfel stated. “Extra letters shall be going out within the close to future, together with each disallowance letters and letters searching for the return of funds erroneously claimed and obtained.”
The announcement comes lower than two months because the IRS unveiled a particular withdrawal course of for small companies that wrongly claimed the credit score to keep away from reimbursement, curiosity and penalties.
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