IRS Reveals Red Flags in ERC Claims

Time is running out to participate in the Employee Retention Credit (ERC) Voluntary Disclosure Program, which ends on March 22, 2024. The program allows filers of erroneous ERC claims to voluntarily disclose ERC claims made in error and pay only 80 percent of the amount received.

The IRS recently released the most common warning signs of an ineligible or overclaimed ERC filing. If you believe any of the following red flags may apply to your claim, a Grassi ERC advisor can help you re-evaluate eligibility and apply for voluntary disclosure:

  • You claimed too many quarters. According to the IRS, qualifying for all quarters is uncommon and should be re-evaluated with a reputable tax advisor.
  • A government order was in place in your area, but your operations were not affected and/or you closed your business voluntarily.
  • You used the same credit amount across multiple tax periods. The rules for qualified wages and employees varied throughout 2020 and 2021.
  • You claimed the ERC based on supply chain disruption, which is most likely ineligible unless the supplier’s government order met specific requirements.
  • You claimed the ERC for an entire calendar quarter, but your business operations were fully or partially suspended for only a portion of that quarter.
  • Your business didn’t pay wages or didn’t exist during the eligibility period, according to IRS records.
  • Your claim was filed under the assumption you had “nothing to lose.” In reality, businesses that file incorrect claims could face penalties, interest and audit expenses.

Keep in mind that the ERC Voluntary Disclosure Program is only available for any payments received before December 21, 2023. If you have not yet received your ERC payment, it is still important that you review these warning signs and confirm eligibility with a trusted tax professional as there are other options available if the claim has been made in error and there may still be time to withdraw your claim without penalty.

For more information or to discuss your ERC claim’s eligibility, please reach out to your Grassi tax advisor or Michelle Schneider, Tax Principal, at 516.918.5954 or

Michelle Schneider Michelle Schneider is a Tax Principal at Grassi. She has more than 15 years of experience in tax planning and compliance for a wide range of industries, including real estate, manufacturing & distribution, healthcare, logistics and construction. Michelle specializes in advising individuals, partnerships and corporations on multistate, consolidated filings and tiered partnership structure returns. Prior to joining Grassi, Michelle was a Tax Director for... Read full bio

Categories: Tax