Oct 18, 2023

IRS Puts Brakes on ERC Processing

Amid rising concerns about a flood of improper Employee Retention Credit claims, the IRS has announced a moratorium, effective from Sept. 14 through at least the end of the year, on processing new claims. Read through to see how this may affect you.

According to the IRS, a moratorium on processing of new ERC claims through year's end will allow IRS to add more safeguards to prevent future abuse, to protect businesses from predatory tactics. The pandemic-era relief program is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 crisis.

In a recent release, the IRS said there has been growing concerns inside the tax agency and tax professionals that many new claims are ineligible and increasingly putting businesses at financial risk, thanks to scams by aggressive promoters.

Already in the system?

If you've already filed, you're okay. The IRS emphasizes that payouts for these claims will continue during the moratorium period but at a slower pace due to the detailed compliance reviews. With the stricter compliance reviews in place during this period, existing ERC claims will go from a standard processing goal of 90 days to 180 days – and much longer if the claim faces further review or audit. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.

But if you're being pressured right now to file, and not even sure you are eligible, take a step back. The IRS is advising business owners to "seek out a trusted tax professional who actually understands the complex ERC rules, not a promoter or marketer hustling to get a hefty contingency fee. Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution. The moratorium will help protect taxpayers by adding a new safety net onto this program to focus on fraudulent claims and scammers taking advantage of honest taxpayers."

Your next steps

Whether you've already filed, or think you might have a reason to file, now is the time to pick up your phone and call your tax adviser. This will be someone who can help you figure out if you are eligible and perhaps ready to file in 2024. If you are already in the system, you can get guidance through the lengthy and complex process.

More details on the moratorium are available on the IRS site. Even more important, the IRS has posted easy-to-follow guidance on how to recognize and avoid promoters who don’t have your best interest at heart.

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