IRS weighs guidance for small business tax credit. ‘People were duped,’ taxpayer advocate says

Currently, there's a backlog of Forms 941-X, known arsenic the adjusted employer's quarterly national taxation return, which businesses indispensable usage to amend returns to assertion the worker retention recognition for 2020 oregon 2021. As of June 14, determination were astir 537,000 unprocessed Forms 941-X, according to the IRS.

Collins said the IRS is moving connected guidance for filers who whitethorn person wrongly claimed the credit.

"I deliberation present there's a spot of buyer's remorse," she told CNBC successful aboriginal June, noting that ineligible filers should commencement reasoning astir "ways to undo this" if they recognize they don't qualify. 

"The biggest happening is to travel guardant first," said Rosemary Sereti, managing manager of Deloitte Tax and a erstwhile IRS elder executive, speaking to CNBC astir worker retention recognition mistakes. "Once [the IRS] comes to you, it's a small excessively late." 

Of course, the existent backlog of Forms 941-X besides includes a batch of "legitimate claims" for the worker retention credit, which person been delayed arsenic the IRS reviews the filings, Collins said. The IRS website says the bureau is moving connected the inventory astatine 2 sites with "trained staff" to reappraisal imaginable Covid-19 credits.

If you wrongly claimed the worker retention credit, you whitethorn beryllium taxable to an IRS penalty, according to Debra Estrem, managing manager of backstage wealthiness contention astatine Deloitte Tax, who besides worked astatine the IRS Office of the Chief Counsel.

She said you whitethorn beryllium taxable to the "erroneous assertion for refund oregon recognition penalty," which is typically 20% of the excess magnitude claimed. But the benignant of punishment depends connected whether the mistake occurred connected the archetypal filing oregon an amended return.