Address ERC Backlog, Taxpayer Advocate Urges

The IRS has asked taxpayers for patience while it carefully examines claims to avoid improper ERC payouts, but stakeholders are growing frustrated with the agency.

The national taxpayer advocate “has it exactly right — the IRS must prioritize processing of ERC claims where the claimant has a significant hardship,” former IRS Commissioner Charles Rettig told Tax Notes.

Rettig called it “unacceptable” for claims deemed by the IRS as low risk to have to wait until later this summer for payment.

Rettig pointed out that changes in ERC eligibility confused businesses that were simultaneously dealing with other issues during the period in which claims could be filed, such as complicated public health regulations, labor shortages, supply chain interruptions, and lack of business opportunities.

“The IRS must find a balance between fraud prevention and taxpayer service, without continuing to mostly ignore taxpayer service by failing to process eligible ERC claims,” Rettig said. “Every one of those businesses is important — many are struggling to survive.”

Darren Guillot of alliantgroup LP, which counsels its clients on their ERC claims, said it’s possible that some claims may have been miscalculated, but they shouldn’t be seen as fraudulent. These miscalculations can easily be rectified, according to Guillot, a former commissioner of the IRS Small Business/Self-Employed Division.

Guillot said he is hopeful that the IRS is able to more efficiently process the pipeline of ERC claims to get the intended financial help to well-meaning businesses.

Justin Elanjian of Stout Risius Ross LLC agreed that there has been a lack of transparency as well as inconsistency and inaction from the IRS regarding the processing of claims.

Better communication about the status of the backlog and wait times “would be helpful as businesses are continuing to evaluate their options for an unprocessed claim,” Elanjian said.

“Many taxpayers don’t have this luxury of waiting in perpetuity for these refunds to process,” Elanjian added.

However, fully alleviating the concerns of businesses that await refunds could still be challenging.

Instituting a boost in processing and more transparency regarding claim status “may prove to be too little, too late if ERC claim processing times are not significantly shortened in the near future,” according to Mary E. Wood of Meadows, Collier, Reed, Cousins, Crouch & Ungerman LLP.

“Unfortunately, the massive amount of perceived fraudulent ERC claims has severely undercut the IRS’s efficiency in processing and paying legitimate claims,” Wood said.