The pandemic program was supposed to be a ‘lifeline’ for small businesses but has been a source of frustration, according to a government watchdog.
The IRS’s handling of a COVID-era tax credit ranks as the agency’s most serious problem, hurting “countless eligible businesses,” a government watchdog says.
Missteps have plagued the Employee Retention Credit program, a report from Erin Collins, the national taxpayer advocate, said. The tax credit compensates employers who kept people on their payrolls despite negative effects from pandemic mandates during 2020–21.
Applications piled up while IRS offices were shut down during the pandemic. Making the backlog worse, the agency hit the brakes on reviewing claims, based on “anecdotal” fears that a large percentage of claims might be fraudulent, Collins’s report said.
As a result, a million claims languished for an average of a year, according to Collins, who heads the Taxpayer Advocate Service, an independent agency within the IRS that calls itself “your voice at the IRS.”
Although the IRS has processed 3.6 million claims, many businesses were left waiting as they obtained loans and paid interest on them. Some…
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