Very Important news: The IRS halts ERTC Processing as of September 14th 2023 until at least the end of the year December 31st 2023.
The reason for this sudden and dramatic Moratorium on processing new claims is to protect taxpayers from scams. The IRS is dealing with a surge of questionable claims. During this stoppage the IRS will add more safeguards to prevent future abuse and protect businesses from predatory tactics. The IRS are working with the Justice Department to pursue fraud fuelled by aggressive marketing.
The IRS have created a very detailed post about this which we highly recommend that you read.
The Highlights:
The IRS are continuing to work through the backlog of approximately 600,000 claims already filed but with concerns about fraud it means the processing times will be longer. Existing ERC claims will go from a standard processing goal of 90 days to 180 days and it could be much longer if the claim faces an audit or further review. Additional documentation may also be requested by the IRS to confirm the claim is legitimate. Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution.
The stricter enhanced compliance review is there to protect from fraud and to help protect businesses from penalties or interest payments if the claim is bad.
The IRS will take time to put new safeguards in place which will stop bad claims from coming in. Something you can do right now – if your business is feeling pressured by promoters to apply for the ERTC please, stop and review your position carefully.
We have always suggested that businesses should seek out trusted ERTC specialist tax professionals that understand the complex ERTC rules so they can check if they firstly are even eligible for the credit. There is IRS guidance on ERTC eligibility and Frequently Asked Questions and a new questions and answers guide to help you confirm your eligibility. One very simple eligibility check is this credit is not available to individuals.
The ERTC is a Valid Refundable Tax Credit
The ERC (Employee Retention Tax Credit) is a refundable tax credit designed for businesses that continued to pay employees through the COVID-19 pandemic (applies to specific Quarters only) even when their business operations were fully or partially suspended because of a government order or if they had a significant decline in gross receipts during the eligibility quarters.
The IRS is Developing a Settlement Program
The IRS is in the process of creating new initiatives to help businesses who find that they have been the victims of aggressive promoters and have received an improper ERC payment. The settlement program may allow businesses to avoid penalties and future compliance action. There is also an issue for businesses that had a promoter contingency fee paid that was paid for out of the ERC payment, options are being investigated by the IRS. The IRS may demand the ERC payment is paid back and there is the possibility that penalties and fines will also be applied. More details will follow in the fall.
The IRS is Developing a Special Withdrawal Option
This is for businesses that have filed an ERC claim already but it hasn’t been processed yet. This will allow many small businesses who have been misled by promoters to avoid any repayment issues and paying promoters contingency fees.
Note – businesses who have wilfully filed fraudulent claims should be aware that withdrawing a fraudulent claim WILL NOT exempt them from potential criminal investigation and prosecution. The IRS has already referred thousands of claims for audit.
We would never recommend putting in an ERC submission until you have thoroughly investigated if your business is eligible for ERC. Beware of promoters who advertise that an ERC submission is “risk free” . You really don’t want to risk the IRS doing an audit and/or criminal investigations into your claim.
The IRS has produced a document with red flags to watch out for aggressive marketing and questionable ERC claims.
In Conclusion
The IRS have halted new ERC file processing from September 14th until at least December 31st 2023. They are investigating a large number of claims they believe to be invalid and will also be working alongside the Justice Department to pursue fraudulent claims and scam promoters.
The IRS are working on a Settlement Program for businesses where the ERC has already been claimed in error. They are also working on a special withdrawal option for claims that have been filed but not processed yet to give business owners the opportunity to remove their claim if they think they are not eligible.
We always recommend using a specialist ERTC Tax expert if you are not confident enough to check your own businesses eligibility. Once eligibility is confirmed they can also help produce the claim refund with accompanying documentation.
In the long run we believe this Moratorium is a good thing. It will catch/remove the scammers and help genuinely eligible businesses claim their ERC tax credit refund. It may even eventually speed up the process as the IRS will not be wading through thousands of erroneous claims.
