IRS Slows Refund Payments for Pandemic-Era Tax Break

Agency warns of fraud in employee-retention tax-credit program

By Richard Rubin and Ruth Simon of The WSJ. Excerpts:

"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.”"

"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."

"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"

"That is roughly triple the original congressional estimates."

"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."