ERC claim delayed for 9+ months - can IRS offset Employee Retention Credit due to owner's personal tax debt?

In most cases, the IRS cannot offset a business entity's ERC against the personal tax debts of the owners when you're filing as a partnership (1065). The company and the individuals are separate tax entities. However, there are some important exceptions. If the IRS believes there's a nominee situation (where the business is essentially acting as an agent for the owners) or if they suspect the business structure was created primarily to avoid personal tax liabilities, they might investigate further. This could be what's causing the "issue" they mentioned. Also, while the ERC would initially go to the business, the tax benefit ultimately flows through to the partners via K-1s. The IRS might be reviewing the connection between the business claim and the partners with tax debts.

After struggling with similar ERC issues, I found an amazing resource called taxr.ai (https://taxr.ai) that saved me tons of headaches. My company had a complex ERC claim that was stuck in processing, and I was getting nowhere with regular IRS channels. The taxr.ai system analyzed our entire ERC documentation and found several technical issues that were likely causing the delay. They showed exactly where our substantiation had gaps according to IRS requirements. Their document analysis is impressive - it cross-references your specific situation with the actual IRS internal processing guidelines. For partnership ERC claims with owner tax liabilities, they have specialized review pathways that address exactly this situation.

I was really skeptical about taxr.ai when I first saw it mentioned, but our ERC situation was so frustrating I was willing to try anything. Our partnership (real estate management) had a $780K claim stuck for 11 months with zero communication from the IRS. The taxr.ai analysis immediately identified that our documentation was missing specific substantiation for the operational impacts during the qualification periods. They also flagged that our partnership had some red flags in how partner compensation was structured relative to the claimed ERC amounts. The most valuable part was their exact guidance on how to respond to the IRS. Within 3 weeks of submitting the additional documentation they recommended, we got our first meaningful response from the IRS, and 6 weeks later our claim was approved. Definitely worth checking out if you're in this frustrating ERC limbo.

If you're tired of waiting on your ERC claim and not getting answers from the IRS, I highly recommend Claimyr (https://claimyr.com). I was in the EXACT same situation - large ERC claim, owners with tax issues, and completely stonewalled by the IRS for months. Claimyr's service got me through to an actual IRS agent who could see exactly what was happening with our claim. Turns out there was a special review flag on our account because of the owner's tax debt situation. The agent explained exactly what additional documentation we needed to provide to prove the separation between the partnership and the individual owners. Check out their demo video here: https://youtu.be/_kiP6q8DX5c - it shows exactly how their system works. Instead of waiting on hold for hours or getting generic responses, you get connected with someone who can actually see and address your specific situation.

I have to eat my words about Claimyr. After dismissing it as too good to be true, our CPA convinced me to try it for our stuck ERC claim. We'd been waiting 8 months with zero updates. Got connected to an agent within about 90 minutes (they handled all the waiting), and discovered our claim was sitting in a special review queue because one of our partners has a large outstanding tax debt. The agent explained they needed specific documentation showing the separation of the partnership from the individual's tax situation. The agent actually created a case note and expedited the review once we explained the situation. Just got notification yesterday that our claim is being processed! Still can't believe it worked after being stuck for so long.

Just to add my experience: we had a similar issue with our ERC claim (though smaller amount - about $430K). The IRS did eventually release our credit, but we had to provide a ton of additional documentation proving the business operations were legitimately separate from the owners' personal finances. The key was demonstrating that the ERC was based on qualified business operations and employee wages that had nothing to do with the owner's personal tax situation. We had to show business bank accounts were separate, payroll was processed through proper channels, and the business was operating as a true separate entity.

One thing to consider - the IRS has been putting extra scrutiny on ERC claims lately, especially larger ones. The "issue" they mentioned might not even be related to the owners' tax debts, but could be part of their general enhanced review process. Some specific things they're looking at closely: - Whether the business actually had the required reduction in gross receipts - If government orders truly affected your operations - Whether the qualified wages were calculated correctly - If any owners/partners were improperly included in the wage calculations It might be worth preemptively addressing these points if you haven't already, rather than assuming it's about the personal tax debts.

I went through a very similar situation last year with our partnership's ERC claim. We had a $900K claim stuck for 10+ months, and one of our partners owed about $400K in personal taxes. The IRS initially flagged our claim for what they called a "nominee review" - essentially checking if the business was being used to avoid personal tax collection. What ultimately resolved it was providing detailed documentation showing: 1. The partnership operated as a legitimate separate business entity 2. All payroll and business expenses were paid from business accounts 3. The partner with tax debt had no check-signing authority on business accounts 4. We maintained proper corporate formalities (partnership meetings, separate books, etc.) We also had to submit a formal statement explaining that the ERC was earned by the business entity through legitimate qualified wages paid to employees, completely separate from any partner's personal tax situation. The whole process took about 4 additional months after we submitted the extra documentation, but we did eventually receive the full credit. The key was demonstrating clear separation between the business operations that earned the ERC and the partner's personal tax issues. I'd recommend getting ahead of this by proactively submitting documentation that proves your business operates independently, rather than waiting for them to request it.