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Kenjya-Trusant Group LLC, a government contractor providing cybersecurity and engineering services, has filed a lawsuit against the U.S. government in Maryland federal court seeking nearly $3.6 million in tax refunds. The suit claims the Internal Revenue Service (IRS) has not responded to its request for employee retention credits from the first three quarters of 2021.

Kenjya-Trusant $3.6M Worker Credits : Decline in Receipts and Eligibility for Credits

The company asserts that its gross receipts declined by over 20% during the COVID-19 pandemic, qualifying it for the employee retention credit. The credit was designed to help businesses keep employees on payroll during pandemic-related downturns.

Kenjya-Trusant reported that its first-quarter receipts fell from $10.6 million in 2019 to $6.6 million in 2021. Similar declines occurred in the second and third quarters, with drops of $2 million and $3 million, respectively. The company employed fewer than 500 people in 2019 and paid qualified wages of at least $10,000 to 183 employees during the first quarter of 2021, further supporting its eligibility for the credits.

IRS Delays Amid Fraud Concerns

Kenjya-Trusant submitted its refund claim through TriNet, a professional employer organization, but the IRS has yet to process the request. The delay comes after the IRS extended its September 2023 moratorium on processing new employee retention credit claims due to widespread fraud. While the agency continues to process previously filed claims, it extended the expected timeline from 90 to 180 days, with potential further delays for claims subject to additional review or audit.

IRS Actions and Fraud Prevention

The employee retention credit, initially enacted under the CARES Act in 2020, was extended through 2021 by subsequent legislation. However, the IRS has taken steps to claw back improper claims, sending up to 30,000 notices to businesses for over $1 billion in credits that could be reversed or recaptured. IRS Commissioner Daniel Werfel stated the agency had already sent 28,000 rejection letters targeting high-risk claims and received disclosures from over 2,600 businesses admitting to $1.09 billion in credits obtained improperly.

Kenjya-Trusant seeks a full refund, plus interest and attorney fees, for its delayed claim. The company is represented by Frost & Associates and SouthBank Legal.