The Internal Revenue Service (IRS) has announced a moratorium on new claims related to the pandemic-era Employee Retention Credit (ERC, also known as Employee Retention Tax Credit). The pause on new claims goes into effect immediately and will last until at least 2024.
When claimed properly, the ERC is a refundable tax credit designed to help employers who continued to pay their employees while their businesses were fully or partially suspended during the COVID-19 pandemic.
The move was prompted by growing concerns over fraud and abuse in the program resulting from scammers aggressively marketing the credit to honest small businesses. Currently, there are hundreds of criminal cases being investigated, with thousands more claims waiting to be audited.
What Is Next for Your ERC Claim?
Previously submitted claims will still be reviewed and paid out, however, at a much slower rate. Expected processing times will double from 90 days to 180 days, with the potential for an even longer timeline if the IRS must request additional documentation to substantiate the claim.
If you have submitted or received an ERC claim, here is what you should do next:
- If you have previously submitted a claim, it will still be processed, but you should be prepared for much longer wait times and increased scrutiny.
- If you have a pending claim, you are strongly encouraged to review it with a trusted tax advisor to confirm its validity and withdraw any claims that are determined to have been submitted improperly to protect yourself against potential repercussions such as fees and interest.
- If you have previously received an ERC in error, there will be guidance forthcoming on how to repay improper claims. There is a settlement program being developed to help businesses who applied in good faith to avoid penalties. More information is expected to be forthcoming this fall.
Protect Your Business Against Fraud
In its release, the IRS emphasized its priority of protecting honest businesses and taxpayers from those seeking to take advantage.
The IRS has also shared a list of warning signs that businesses should watch out for to protect themselves against aggressive marketers.
Businesses are encouraged to review their claims now to avoid negative impacts, including fines and fees. IRS commissioner Danny Werfel advised seeking the guidance of reputable advisors, saying, “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.”
The tax professionals at Bowman & Company have the knowledge to help protect your business, please reach out today with any questions related to your ERC claims.