On September 14, 2023, the Internal Revenue Service (“IRS”) announced an immediate moratorium on processing new claims for the Employee Retention Credit (“ERC”) through at least the end of 2023 to protect small business owners from being scammed by aggressive promoters and marketing.
IR 023-169 – To protect taxpayers from scams, IRS orders immediate stop to new Employee Retention Credit processing amid surge of questionable claims; concerns from tax pros | Internal Revenue Service
The IRS will continue to review and process around 600,000 ERC claims received prior to the moratorium but reminded businesses that increased fraud concerns means longer processing times. The IRS emphasized that payouts for these claims will continue during the moratorium period but at a slower pace due to detailed compliance reviews – 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. This enhanced compliance review of existing claims submitted before the moratorium is critical to protect against fraud but also to protect businesses from facing penalties or interest payments stemming from bad claims pushed by promoters, according to IRS Commissioner Danny Werfel.
The Commissioner also reiterated that businesses being pressured by promoters to apply for the ERC should pause and review the situation and 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.
Taxpayers are encouraged to review IRS guidance and tools for helping determine ERC eligibility, including frequently asked questions and a new question and answer guide released yesterday to help businesses understand if they are eligible for the ERC. The IRS is also finalizing new initiatives that will be announced later this Fall to help businesses who find themselves victims of aggressive promoters. These programs include a settlement program for making repayments for businesses who received an improper ERC payment, as well as a special withdrawal option for businesses who have filed an ERC claim, but the claim has not been processed. Filers of the more than 600,000 claims awaiting processing will have this option available.
As part of a wider compliance effort, the IRS is working with the Justice Department to address fraud in the ERC program as well as promoters who have been ignoring the rules and pushing businesses to apply. The IRS has also trained auditors examining ERC claims posing the greatest risk, and the IRS Criminal Investigation division is actively working to identify fraud and promoters of fraudulent claims for potential referral for prosecution.
In May, the IRS added the Employee Retention Credit to its 2023 “Dirty Dozen” list of tax scams, warning businesses about aggressive promoters misleading businesses into thinking they can claim these credits.
If you have questions or concerns about whether your business is eligible for the ERC, or you previously filed a claim or received payment for a claim and are now questioning whether your business was in fact eligible for the credit, contact Tronconi Segarra & Associates LLP at ERCteam@tsacpa.com. We have been professionally assisting businesses with ERC claims since this tax credit was enacted and can review your specific facts and circumstances and assist you with taking the best course of action for your business.