XPost: or.politics, ca.politics, alt.fan.rush-limbaugh
<
http://wsj.com>
IRS Slows Refund Payments for Pandemic-Era Tax Break
Richard Rubin
U.S.
Agency warns of fraud in employee-retention tax-credit program
WASHINGTON-The Internal Revenue Service has slowed the payment of tax
refunds to employers under a pandemic-era program, as the agency struggles
to combat what it says are fraudulent and overstated claims for the employee-retention tax credit.
"We remain deeply concerned about small businesses being scammed and
dubious Employee Retention Credit claims being submitted amid aggressive marketing to the business community," the IRS said Tuesday. "The IRS has
slowed our processing of these claims to guard against fraudulent or
incorrect submissions as we work to enhance our procedures and controls to
best protect small-business owners and taxpayer dollars."
The announcement marks the government's biggest step to rein in the
cottage industry of employee-retention tax-credit advisers that has
emerged in the past few years. The IRS is likely facing years of disputes
and litigation because it is expected to try to claw back some refunds it
has issued.
Congress created the employee-retention credit, or ERC, in 2020 as part of
its response to the coronavirus pandemic. The aim was to reward employers
for keeping workers in their jobs. Eligible employers that experienced
revenue declines or had their operations suspended by government orders
can get up to $26,000 per employee.
The rules for the credit changed several times, and the tax break expired
Sept. 30, 2021. But claims have boomed since then. Under the tax code, employers have up to three years to amend their payroll tax returns and
claim the credit.
That created an opening for a pop-up industry to bloom. Firms that
encourage employers to seek the credit, including many that didn't exist a
few years ago, advertise heavily and persistently contact employers. They
often take a percentage of the tax refund as their fee. Many warn that
they don't offer tax or legal advice.
As of early March, the IRS had paid more than $150 billion in ERC refunds, according to the agency. It likely paid $220 billion through July before payments started slowing down in August, according to an analysis of
Treasury Department data by the investment bank Piper Sandler. That is
roughly triple the original congressional estimates.
IRS officials have been warning for months about fraud and overstated
claims for the credit. And many accountants have said that ERC firms are stretching the eligibility criteria. But the government has also been
facing pressure in the opposite direction, from business owners and
lawmakers concerned about refund backlogs that sometimes stretched for
months.
In its statement, the IRS said it worked through a backlog of 800,000
claims and then began intensifying its reviews and compliance work as more refund claims came in.
The IRS discourages employers from using ERC firms that charge large
upfront fees or that base fees on a percentage of the tax refund. This
summer, it issued a legal memo that warned against an argument some firms
were using to claim the ERC based on supply-chain disruptions.
In the past, the IRS has dealt with widespread tax dodging by offering settlements for people who disclose their transactions. That can be particularly efficient for the government, compared with thousands of individual audits that depend on the facts in each situation. An IRS
employee told a congressional office late last month that the agency is
working on such a program for the ERC, according to a message viewed by
The Wall Street Journal.
In addition, IRS Commissioner Danny Werfel said that the IRS might ask
Congress to accelerate the deadline for amended tax returns claiming ERC refunds. Under current law, 2020 tax returns can be amended until April
2024, and 2021 returns can be amended until April 2025.
Write to Richard Rubin at
richard.rubin@wsj.com
--
==================================================
Anyone that isn't confused doesn't really
understand the situation.
~Edward R. Murrow USA WWII Correspondent ==================================================
--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)