IRS Orders Stop to Processing of New Employee Retention Credit Claims

ERC Scams an “Unacceptable Risk to Businesses and the Tax System”

The MAC often receives calls from members asking questions about the Employee Retention Credit, a refundable tax credit designed to reward business owners for retaining employees throughout the COVID-19 pandemic. Earlier this year the IRS issued warnings urging small businesses to “steer clear of scammers promising big money with the Employee Retention Credit.”

Now, the IRS has taken a further step. Following growing concerns inside the tax agency and tax professionals, on top of media reports that a substantial share of new claims from the aging program are ineligible and increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing, IRS has announced an immediate moratorium on processing of new claims through year’s end to allow IRS to add more safeguards to prevent future abuse and protect businesses from predatory tactics. Additionally, IRS is working with the Justice Department to pursue fraud fueled by aggressive marketing.

IRS continues to process claims filed before the September 14th moratorium, but processing times will be longer than usual as the agency focuses on compliance concerns, including “intensifying audit work and criminal investigations on promoters and businesses filing dubious claims.” To date, hundreds of criminal cases are being worked and thousands of ERC claims have been referred for audit.

IRS encourages taxpayers to review IRS guidance and tools for helping determine ERC eligibility, including frequently asked questions and a new question and answer guide designed to help businesses understand if they are actually eligible for the credit.

For more information, including advice for those currently awaiting an ERC claim, steps to take if considering filing a claim, and warning flags, see IR-2023-169.

Source: IR-2023-169, “To protect taxpayers from scams, IRS orders immediate stop to new Employee Retention Credit processing amid surge of questionable claims; concerns from tax pros,” September `14, 2023

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