IRS Halts Processing of New ERC Claims

In September, the IRS announced a moratorium on processing new Employee Retention Credit (ERC) claims through at least the end of 2023 amidst concerns about an inundation of improper claims.  The IRS and tax professionals are worried that a large portion of new claims are actually ineligible, putting businesses at risk due to pressure and scams from aggressive promotors.

The IRS will continue to process claims filed before the moratorium, but processing times will be longer due to fraud concerns.  These claims will be subject to stricter compliance reviews, including more in-depth audit work and criminal investigations into promotors and businesses filing dubious claims.  Processing time is expected to go from 90 days to 180 days, potentially longer if a claim faces further review.  The IRS also notes that additional documentation may be requested.  Payouts will still continue during this time.

The increased review of these claims is not only to protect the government against fraud, but also to protect businesses from bad claims that were pushed by promotors.  The system is being abused by these promotors and businesses are the ones who stand to face penalties and interest due to questionable claims.  The IRS urges businesses to contact trusted tax professionals, who understand the complex ERC rules, instead of using a promotor or marketer who pressures people to file claims in hopes of receiving a contingency fee.  For businesses who have been scammed, more details will be available this fall regarding a settlement program for repayments of improperly received ERC payments.  The IRS is also finalizing details for a withdrawal option for claims that have not yet been processed.

To summarize, the IRS has the following advice for businesses:

• If a business already has an ERC claim on file, it will be processed, but allow for additional time as these claims are now facing additional scrutiny.
• If you are considering filing a claim, carefully review the guidelines and consider talking to a tax professional. Wait to file your claim as there is currently a moratorium on new claims.
• If you have submitted a claim that you now believe to be improper, and the claim has not been processed or paid, you can withdraw the claim.
• The IRS is working on a settlement program that will allow businesses to repay ERC claims that were paid in error, allowing the business to avoid penalties and future compliance actions.

Contact Us

If you have questions about the information outlined above or need assistance with a tax or accounting issue, Klatzkin can help. For additional information call 609-890-9189 or click here to contact us. We look forward to speaking with you soon.