IRS Ceases Processing of New Employment Retention Credit Claims

An Internal Revenue Service news release announced that the IRS would halt processing new Employee Retention Credits (ERC). The moratorium, beginning September 14, 2023, is expected to run through at least the end of the year. The news report stated that the IRS will “continue to work previously filed Employee Retention Credit (ERC) claims received prior to the moratorium but renewed a reminder that increased fraud concerns means processing times will be longer.”

For those who have already filed ERC claims, the news release further provides:

The IRS emphasizes that payouts for these claims will continue during the moratorium period but at a slower pace due to the detailed compliance reviews. With the stricter compliance reviews in place during this period, 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.

For those considering the ERC, the news release quoted IRS Commissioner Danny Werfel, who stated:

“For those people being pressured by promoters to apply for the Employee Retention Credit, I urge them to immediately pause and review their situation while we look to add new protections and safeguards to stop bad claims from ever coming in,” Werfel said. “In the meantime, 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. Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution. The moratorium will help protect taxpayers by adding a new safety net onto this program to focus on fraudulent claims and scammers taking advantage of honest taxpayers.”

The ERC was made available during the COVID-19 pandemic to encourage businesses to retain workers by offering a refundable tax credit against certain employment taxes equal to a certain percentage of the qualified wages (including allocable qualified health expenses) that an eligible employer paid to employees after March 12, 2020, and before October 1, 2021 (before January 1, 2022, for recovery start-up businesses).

Employers for both for-profit and tax-exempt organizations are eligible if they experience either:

  • A full or partial suspension of business operations due to COVID-19 pandemic governmental orders.
  • A significant decline in gross revenue, as defined by a 50% revenue decline in 2020 or a 20% decline in 2021 when compared to 2019.

To claim the credit, a formal ERC tax study is required. ICS has successfully claimed the ERC for numerous firms in varying industries. Our comprehensive ERC studies include audit support and are performed with the utmost care by a team of CPAs and attorneys. Let us partner with you and determine your eligibility. » ERC Consultation