Business Owners Should Appeal Potentially
Dubious IRS Determinations, Says CA Law Firm Brotman
Law
SAN
DIEGO, July 30, 2024 /PRNewswire/ -- A surge of
new IRS letters denying pandemic-era Employee Retention Tax Credit
(ERTC) claims are starting to reach businesses, forcing many to
navigate a lengthy appeals process or to consider litigation
against the agency. Furthermore, many taxpayers who have received
the letters believe they fully qualify for the Employee Retention
Tax Credit, which only casts doubt on the rationale the IRS used to
base their denial on.
Impact of the IRS Response to ERTC on Businesses
The ERTC was designed to help businesses retain employees during
the pandemic but has since been plagued by fraudulent claims. In
response, the IRS paused processing new claims in September and
initiated a crackdown on erroneous claims. To date, government
watchdogs estimate that the IRS has received about 1.4 million
pending claims. In response to the volume, the agency says that it
will deny tens of thousands more claims, identifying between 10 and
20 percent of claims as high-risk and potentially erroneous.
Another 60 to 70 percent of claims have "an unacceptable level of
risk" and will be further scrutinized.
IRS Claims Met with Skepticism by the Legal Community
In the wake of the IRS's most recent announcement and as
taxpayers start receiving their denied claims, many tax attorneys
and other practitioners express doubt as to the information the IRS
is utilizing to make its determinations. Amended payroll tax
returns, which were filed in order to claim the credit, do not
contain any outward information about the circumstances that
support the taxpayer's claim for the ERTC. Instead of requesting
additional documentation or substantiation from the taxpayer, as is
the normal process in an IRS audit, the IRS has instead chosen to
disallow the claims outright while providing little justification
for the grounds for their decision.
"I have a hard time believing that the IRS has enough
information to conclude that 80 to 90 percent of ERTC claims that
were filed by taxpayers were fraudulent or have unacceptable levels
of risk. When you look back at the pandemic, an overwhelmingly
disproportionate number of businesses were impacted by government
orders and restrictions around the country," says owner and
managing attorney of Brotman Law, Sam
Brotman. "As such, the math does not make much sense, and
the IRS seems to be doing this as a means of ridding themselves of
these claims without having to defend their position. These
decisions feel very arbitrary and capricious, and it is unfortunate
because the IRS has chosen yet again not to provide transparency on
the issue. As such, they do a great disservice to the taxpaying
business community in this country."
Professional Recommendations
Although the IRS appeals process can prolong an ultimate
decision, taxpayers who receive these denial letters are urged to
fight the IRS's decision and request a conference with the IRS
Office of Appeals. The IRS Office of Appeals is an independent body
designed to help resolve disputes between taxpayers and the
government before they reach litigation. Although the IRS has taken
an aggressive position toward its interpretation of taxpayer
claims, taxpayers may find a more favorable environment to hear
their claim in the IRS Office of Appeals. Furthermore, as several
court cases play out challenging the IRS's position on ERTC and its
authority, the landscape on this issue may shift in favor of the
taxpayer.
Conclusion
The small business community is facing significant challenges
due to these denial letters. Tax professionals and business
advocates are calling for a clearer, more consistent path forward
to ensure legitimate claims are recognized and businesses are not
unfairly penalized.
Brotman Law is a national tax law firm headquartered in
San Diego, California. For over
ten years, the firm has successfully navigated IRS audits, finding
ways to produce the best possible result for clients even in
situations where matters are incredibly nuanced or difficult.
Brotman Law is available to speak with any business owner,
professional services provider, or individual interested in
assessing their Employee Retention Tax Credit claim and can be
reached on their website.
Contact:
Aliyah Yates
Marketing Manager
Brotman Law
(619) 378-3138
ayates@sambrotman.com
About Brotman Law
Brotman Law is an established team of law professionals that
have been helping clients and their businesses navigate the
intricacies of tax law for over 10 years. The firm has processed
thousands of individual ERTC claims representing over $160 million and the seasoned audit
representation team has collectively been involved in more than a
thousand audits. Brotman Law is dedicated to providing every client
with exceptional legal services accompanied by a compassionate
approach that is unheard of in the industry. Beyond just successes
with the IRS and tax agencies, the Brotman Law team is singularly
united by genuine empathy for all clients, a strong desire to help,
and never-say-quit tenacity that propels the firm to the best
possible results on their clients' behalf. For more information or
to book a consultation with the Brotman Law team, visit
SamBrotman.com or call (619) 378-3138.
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SOURCE Brotman Law