The IRS announced on September 14, 2023, an immediate moratorium on processing any new Employee Retention Credit (ERC) claims through at least December 31, 2023. This action comes after the IRS issued multiple warnings of aggressive marketing schemes targeting ineligible small business owners. These schemes present unacceptable risks to small businesses who filed legitimate claims and even the tax system at large, and as such, the IRS has acted definitively.
What does this mean for you?
- The IRS will continue to process ERC claims filed prior to the September 14 announcement. The moratorium on processing new claims through the end of the year will allow the IRS to add more safeguards to prevent future abuse and protect businesses from predatory tactics.
- Claims will face long processing delays (up to a year) because of increased restrictions and compliance reviews on existing claims. In some instances, more documentation may be necessary. The standard processing time will change from 90 to 180 days.
- As part of the wider compliance effort, the IRS is working with the Justice Department to address fraud in the ERC program. Both departments are focused on stopping the promoters who have been ignoring the rules and pushing businesses to apply, as well as settlement programs for repayments for those who received improper ERC payments under advice from these promoters.
- The IRS is also finalizing details for small businesses to withdraw their currently filed claims through such promoters so that they do not have to pay promoter contingency fees.
- Most importantly, the IRS is urging employers who have already filed for an ERC credit to consult with a tax professional to ensure proper program eligibility.
This moratorium will undoubtedly help protect business owners from scammers looking to take advantage of honest taxpayers. The tax professionals at Ellin & Tucker are well versed in the complex rules and eligibility requirements for the ERC program. Please do not hesitate to reach out to one of our tax experts for more ERC guidance.