On September 14, 2023, the IRS announced the they will stop processing any new ERC claims immediately. The decision was made to halt the processing of new claims from now until at least the end of 2023. Why? To help protect businesses from fraud. Many small businesses filing new claims are being mislead and scammed by aggressive marketing and promoters, which is putting them at risk financially. In fact, the IRS stated that 'hundreds of criminal cases are being worked, and thousands of ERC claims have been referred for audit.' Due to this, the IRS is urging any businesses who may be thinking about filing an ERC claim to consult with a trusted tax professional and fully review the ERC guidelines.
Since we are now two years past the 2021 ERC program eligibility date, the fact is most businesses that were impacted by the pandemic have already filed their claim.
In a statement to the press, IRS Commissioner Danny Werfel stated, "The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in," Werfel said. "The further we get from the pandemic, the further we see the good intentions of this important program abused. The continued aggressive marketing of these schemes is harming well-meaning businesses and delaying the payment of legitimate claims, which makes it harder to run the rest of the tax system. This harms all taxpayers, not just ERC applicants."
"For those people being pressured by promoters to apply for the Employee Retention Credit, I urge them to immediately pause and review their situation while we look to add new protections and safeguards to stop bad claims from ever coming in," Werfel said. "In the meantime, businesses should 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."
What if I filed an ERC claim before September 14, 2023?
All ERC claims filed prior to September 14, 2023 will still be processed by the IRS, however business owners who have filed claims should expect longer than usual processing times as the IRS plans to aggressively increase fraudulent compliance review. This includes increased audits and a criminal investigation of both scammers and businesses who have filed ineligible claims. Average processing times may go from 90 to 180 days or more.
What is the Employee Retention Credit (ERC)?
Also referred to as the Employee Retention Tax Credit (ERTC), the ERC was created during the COVID-19 pandemic to help businesses who continued to pay employees during the pandemic while the:
- Government enforced a partial or full shutdown
- business had a significant decrease in gross receipts during eligible periods of reopening
To learn more, please read the IRS' full press release: