Although the IRS has issued many warnings to taxpayers to beware of solicitations they receive from consultants offering to assist them with this tax credit, many businesses have continued to fall prey to fraudsters “helping” them to file improper claims for the Employee Retention Credit (ERC). In an effort to protect honest small business owners from scams, on September 14, 2023, the Internal Revenue Service announced an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program. According to the IRS, a substantial share of new ERC claims are ineligible. Taxpayers are encouraged to review IRS guidance and tools for helping determine ERC eligibility, including frequently asked questions and a new question and answer guide released today to help businesses understand if they are actually eligible for the credit.
IRS Commissioner Danny Werfel noted, “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.”
Businesses are being pressured and scammed by aggressive promoters and marketing to submit claims, which can put them at financial risk. Werfel emphasized, “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 IRS continues to work previously filed ERC claims received prior to the moratorium, but renewed a reminder that increased fraud concerns means processing times will be longer. Payouts for these claims will continue during the moratorium period, but at a slower pace due to more detailed compliance reviews that are now being performed to help protect businesses from facing penalties or interest payments stemming from bad claims pushed by promoters. 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.
The IRS release also advice from Werfel to business owners, “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. 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.”
GYF has assisted many organizations with legitimate ERC claims that have resulted in significant tax savings over the last several years. If you have questions or need assistance with credits or other tax issues please contact GYF at 412-338-9300.
