In last month’s Bottom Line newsletter, we explained how the IRS has slowed the processing of any new Employee Retention Credit claims, in order to guard against fraudulent or incorrect submissions. The ERC is a pandemic-era relief program made up of refundable tax credits designed for businesses that continued paying employees during the COVID-19 crisis.
Amid rising concerns about a flood of improper Employee Retention Credit claims, on September 14th 2023, the IRS has announced a new moratorium, through at least the end of the 2023 year, placing an effective hold on processing new ERC claims. Per the IRS, there have been growing concerns inside the tax agency that many new claims are ineligible and increasingly putting businesses at financial risk, thanks to scams by aggressive promoters.
This moratorium will allow IRS to add more safeguards to prevent future abuse, and will protect businesses from predatory tactics.
Already in the system?
At LMC, many clients have applied for the ERC and a significant amount have already received their credits. If you’ve already filed, you’re okay. However, for those who are waiting, the wait might have just gotten a little longer. With the stricter compliance reviews in place, existing ERC claims will go from a standard processing goal of 90 days to 180 days – and much longer if the claim faces further review or audit. If you are filing a new claim, the earliest that the IRS will begin to process the claim will be 1/1/24. In either case, the IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.
The IRS is also developing a settlement program for businesses that already received a credit they may not be entitled to. Repayment details have not yet been made available. The program is expected to contain provisions to avoid penalties and other compliance actions.
In addition, the IRS is finalizing details that will be available soon for a special withdrawal option for those who have filed an ERC claim but the claim has not been processed. This program is designed to help businesses avoid possible repayment issues and promoter contingency fees. It will not necessarily exempt those who willfully filed false claims from any potential criminal investigation or prosecution.
If you have any questions or concerns regarding ERC eligibility or filing, please reach out to your LMC professional.