What ERC Disallowance Letters Indicate and How to File an Appeal
Undoubtedly, COVID-19 had a major effect on businesses around the nation. In response to this impact, the Employee Retention Credit (ERC) was created to help pandemic-affected companies. The ERC was a tax credit designed to help some authorized companies in recovering part of the costs incurred in keeping their employees paid during the epidemic, even while their operations were affected.
The Employee Retention Credit (ERC) proved to be highly beneficial for businesses in Troy. Unfortunately, many companies that looked for the tax credit were either unaware of their eligibility or had fallen prey to one of the numerous scams using the ERC. To know more about ERC, contact payroll services in Troy, MI.
How do you appeal for ERC Disallowance letters?
The Employee Retention Credit was created in 2020 by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to motivate businesses to keep their employees on the payroll even when COVID-19 interfered with their company. Even while the Relief Act was an essential aid to businesses, many of them were disqualified when they looked for and were given this credit.
In September 2023, the IRS declared an ongoing ban on any new ERC claims as a result. Furthermore, they assumed a more skeptical posture and stated in June that thousands of ERC claims that were ineligible would be reviewed and rejected.
Common Problems with ERC Disallowance Letters
The IRS Letter 105C has been sent to quite a number of companies lately, and many of them are reporting some problems with it, like mistakes and abnormalities. Many companies have not been informed of their rights or have not had sufficient information to appeal the decision to deny them because of the lack of information in some Employee Retention Credit disallowance letters.
There are some significant problems with the ERC disallowance letters:
- Incorrect or inapplicable reasons for disallowing the claim.
- Insufficient explanation of the right to an administrative appeal.
- Not being aware of one’s rights to administrative appeals.
How to Reduce Inaccuracies
If you get an ERC disallowance letter, you should review it immediately. Disallowance letters for Employee Retention Credit often give details about your claim being rejected as well as a date for beginning the ERC appeal procedure if you feel your claim was unfairly dismissed.
These four actions will help you reduce and fix mistakes in your ERC letter:
- Check the accuracy of the disallowance letter.
- Assemble any necessary supporting papers for your ERC claim.
- To fix any errors, get in touch with the IRS official listed on the letter.
- Ask to speak with a supervisor if you need help resolving the problem.
Preserving the Appeal Right
If a taxpayer believes an ERC claim denial was wrongful, they have the decision to file a lawsuit or launch an appeal. A fair and impartial administration appeal process is provided to taxpayers under the Taxpayer Bill of Rights, allowing them to challenge any IRS decision, including penalties. In addition to usually having the right to file a lawsuit, taxpayers are entitled to a written response about the IRS Independent Office of Appeals (IOA) ruling.
Conclusion
In the case that your company has received an Employee Retention Credit disallowance letter, you must take immediate and suitable action to resolve the denial of your ERC claim.
These actions involve verifying the accuracy of your disallowance notice, collecting relevant data and additional proof for your ERC claim, getting in touch with the IRS employee or supervisor mentioned in the letter to fix any mistakes, and initiating the appeals process.
Depending on which option their case qualifies for, taxpayers may choose to make a formal written request or a minor case request to dispute the IRS’s opinion about a claim. In order to continue ERC compliance with IRS norms, companies that decide to start the ERC appeal process should make sure they take action within the timeframe provided in their letter.
