On September 14, 2023, the Internal Revenue Service (IRS) declared an immediate moratorium on processing new claims for the Employee Retention Credit (ERC) through the end of the year. This measure has been taken in response to rising concerns about improper claims and the increasing frequency of scams targeting small business owners.
IRS Commissioner Danny Werfel cited that a significant percentage of new claims from the aging program are ineligible, putting businesses at risk due to aggressive promoters and marketers. The IRS, however, will continue to work on previously filed ERC claims received before the moratorium.
Amid increased fraud concerns, the IRS has warned that processing times will be extended. The standard processing goal of 90 days will extend to 180 days or longer if the claim faces additional review or audit. The IRS may also request additional documentation to verify the legitimacy of a claim.
The IRS is working with the Justice Department to address fraud in the ERC program and to pursue those ignoring the rules and pushing businesses to apply. To this end, the Criminal Investigation division is actively identifying fraud for potential referral for prosecution.
The IRS has urged businesses to pause and review their situation before applying for the ERC and to seek advice from a trusted tax professional who understands the complex ERC rules.
In addition, the IRS is developing new initiatives for businesses that have been victims of aggressive promoters, including a settlement program for repayments for those who received an improper ERC payment. Details of these initiatives will be available this fall.
The IRS is also finalizing a special withdrawal option for those who have filed an ERC claim that has not been processed. This option will allow taxpayers, predominantly small businesses, to avoid possible repayment issues and paying promoters contingency fees.
The IRS's efforts to combat fraud and protect small business owners are commendable, but it means that processing times may be significantly extended, and claims will be heavily scrutinized. We encourage businesses to seek guidance from our trusted tax advisors, who can navigate the complex ERC rules and ensure compliance. If you have any questions or would like to discuss the ERC program further, please do not hesitate to contact our office. Our expert advisors are here to assist you every step of the way.