The IRS announced on September 14, 2023, that it has ordered an immediate halt to new Employee Retention Credit processing in an effort to protect taxpayers from scams. Amid a surge of concerns from tax professionals, the submission of questionable claims, and aggressive marketing to ineligible applicants, IRS officials have highlighted an unacceptable risk both on the tax system and businesses.

What this means is that the IRS is not accepting any new amended Forms 941-X returns claiming the ERTC throughout the period of the moratorium. The moratorium on processing new claims for the pandemic-era relief program will remain in effect at least through the end of the year. Therefore, the IRS recommends not submitting additional claims until the moratorium is lifted.

Any previously filed ERC claims received before September 13, 2023, will be processed, but the IRS has renewed its reminder that an increase in fraud concerns has resulted in an increase in processing times. In late July, the agency announced its increasingly shifted focus to review all claims for compliance concerns. These efforts include intensifying the audit work involved in processing the claims and criminal investigations on businesses filing false claims and promoters attempting to scam business owners.

During the moratorium, approved claims will still be paid out, but at a slower pace as the result of more detailed compliance reviews. The processing goal for ERC claims has increased from 90 to 180 days, and claims facing further review or audit will take longer. The IRS may request additional documentation from the submitter of the claim to ensure its legitimacy.

Submitting false claims can put a business owner in legal trouble, including the risk of fraud, penalties, and interest payment. The goal of the moratorium is to protect honest taxpayers who are pushed into submitting claims by aggressive promoters. It’s recommended that any business owner considering filing a claim to seek out a trusted tax professional who understands the complex rules.

In addition, there are two additional programs that IRS is in the process of finalizing details for.

• First is a claim withdrawal process for employers that believe their claims were filed erroneously.  IRS will be establishing a program for those employers to withdraw their claims without penalty. Details to be provided by IRS soon.
• Second, IRS will also be establishing a settlement program for employers that have already received refunds of the credit and who now, in retrospect, wish to withdraw their claim.  Again, more details are expected shortly on exactly what this program will look like.

It may also be helpful to utilize the tools and resources available on the IRS website, including:

• Determining ERC eligibility
• Reviewing FAQs
• Looking at the question and answer guide (added to the site on 9-14-2023)

Full details of the announcement are also available here.

This article is informational and does not constitute legal or financial advice. Consult with an employment lawyer or accountant for additional clarification on how these changes impact your company.