The IRS red flags small business Employment Retention Credit claims

CHEYENNE, Wyo. (Wyoming News Now) –

Well, the pandemic may have come and gone, but its effects on our economy still linger.

Small businesses across Wyoming are still trying to make ends meet while claiming COVID benefits, and the IRS is now refusing to pay.

Congress initiated the employment retention credit during the pandemic. It is a refundable tax credit for eligible employee-based small businesses and tax-exempt organizations.

Most recently, the IRS imposed a moratorium on these new claims, stating that waste, fraud, and abuse have slowed processing cases to the tune of 1 to 2 thousand claims every week.

The IRS states they determined between 10 and 20 percent of claims were high-risk.

In a statement, the IRS commissioner Danny Werfel said,

According to Coalition to Preserve American Jobs spokesperson Ryan Taylor, these new red flags have backlogged low-risk claims by 8 to 10 years.

Taylor says that rather than working on legitimate low-risk claims, the IRS is prioritizing denial letters for fraudulent claims.

“There are 18,000 to 300,000 legitimate claims of business owners and employers out there who are waiting who were promised this support and are still waiting for it, said Taylor.

This is after people filed more than 86 billion dollars in claims last year.

The IRS commissioner goes on to say,

“The completion of this review provided the IRS with new insight into risky employee retention credit activity and confirmed widespread concerns about a large number of improper claims,” said Werfel.

But Taylor says that for small businesses, this money is their lifeline.

There’s a cash crunch in this country right now 70 percent of small businesses have reported having 4 months or less of operating cash on hand,’ says Taylor.

Fortunately, some local businesses have received funds. The Montessori School of Cheyenne received $108,800 in July 2023.

Georgie Johnson, the director of the Montessori School of Cheyenne, says the school benefited immensely from the employee retention tax credit.

But not everyone is so lucky, and Taylor says these small businesses have jumped through hoops to keep their businesses afloat.

“When you’re dealing in this kind of smaller numbers, that little bit makes a huge difference. On whether you can keep your doors open. Where you can expand, hire new people, and buy new equipment. You can see the trickle-down effect on the economy that this has,” says Taylor

The IRS admits this is one of the most complex credits it has administered. It wants to ensure it protects taxpayers against improper payouts and sends checks to those who are truly eligible.

The IRS says the ERCS benefits for 2020 sunset on September 2024, and the ERCS 20-21 benefits sunset on April 2025.

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