In a news release issued on September 14, 2023, the IRS stated it’s imposing a moratorium (or a suspension) on processing new employee retention credit (ERC) claims. The moratorium will begin immediately and continue at least through December 31, 2023. With this news, many taxpayers are wondering how this impacts their existing claims and what action they should take, if any. Our tax services team is addressing some of the common questions on the top of taxpayer minds so that you can better determine next steps for your business.
Why is this happening?
With the moratorium, the IRS is aiming to push the pause button on claims it believes are fraudulent. Their goal is to stop fraud committed by promoters in ERC mills who promise to help businesses obtain the credit, often in return for a contingency fee based on the size of the credit. The IRS reminded taxpayers that if ERC refunds are received improperly, they must be repaid and may be subject to penalties and interest.
My business already submitted a claim. Will it still be processed?
The IRS will continue to process claims that were received prior to the moratorium being put into place, but at a slower pace due to being subject to increased compliance scrutiny. The estimated timeframe for processing these already submitted claims will be increased from 90 days to 180 days. There’s also the potential for it taking a significantly longer time if the IRS determines that further documentation or scrutiny is warranted. The IRS also stated that wait times for refund payments coming from existing claims will be increased.
For taxpayers with unprocessed claims, or claims that haven’t yet resulted in refunds being issued, the IRS suggests they have their claims reviewed by a trusted tax professional so that sufficient documentation is in place should the IRS want to take a closer look.
Can I withdraw my previously submitted claims?
The IRS will be providing details later this fall on how a taxpayer can withdraw an already filed claim if the taxpayer has reason to believe they don’t meet the eligibility requirements. This withdrawal can be done even if the claim is already under audit or awaiting audit. However, the IRS cautioned that this won’t protect taxpayers who willfully filed fraudulent claims from potential criminal investigation.
The IRS is also putting together a program whereby taxpayers will be allowed to repay a claim they received erroneously. Repaying the claim will allow penalties and future compliance action to be avoided. More details on this program should be released later this fall.
What if my business hasn’t yet filed a claim?
For taxpayers who haven’t yet filed an ERC claim but believe they qualify for an ERC refund, the IRS is advising them to review ERC guidance with a trusted tax professional.
We’re here to help
Creative Planning Business Services partners with clients on their business taxes every day, and we’d be happy to assist you. Contact us today to learn more about our range of tax services. If you already partner with one of our advisors, we encourage you to reach out if you have any questions or concerns regarding this new IRS guidance.