As tax practitioners were busy working to meet the September 15 filing deadline, the Internal Revenue Service was busy as well. On September 14, the IRS issued a news release announcing an immediate stop to processing Employee Retention Credit (ERC) claims filed on or after September 14, 2023. The news release also suggests that prior ERC claims will be subject to significant delays while the IRS carefully reviews them. The immediate moratorium is in effect until at least December 31, 2023.
The IRS has become increasingly concerned about aggressive and predatory sales tactics some disreputable startup companies have been using to generate ERC-related business and the agency has been besieged with improper claims as a result. In the news release, 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. 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."
With approximately 3.6 million ERC claims received by the IRS, the agency has instituted the moratorium to implement stricter compliance reviews. Thus, 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. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.
The news release note that the IRS will implement two ERC compliance options in the near future: the ERC Settlement Program and the ERC Withdrawal Option.
- ERC Settlement Program: With more details to be released by the IRS this fall, the ERC Settlement Program is designed to help taxpayer-businesses “who found themselves victims of aggressive promoters.” The program will permit taxpayers the option of making repayments to the IRS of previously issued ERCs.
- ERC Withdrawal Option: This option would be applicable to taxpayers who have filed an ERC claim that has not yet been processed. Under this option, the taxpayer can effectively waive the refund claim and avoid repayment issues and paying promoter contingency fees (the latter of which are generally based on the IRS issuing an ERC refund).
We will continue to share relevant updates as they become available. If you have any questions about the ERC, or if you have an ERC claim in process and would like to discuss your individual circumstances, please reach out to your Kreischer Miller relationship contact.