Executive summary
On Sept. 14, 2023, the IRS announced a temporary stop on processing new employee retention credit (ERC) claims due to its concerns about fraud. The moratorium is expected to extend at least through the end of the 2023 calendar year. In addition, the Service indicated it is in the process of finalizing programs through which taxpayers can withdraw their unprocessed ERC claims and repay refunds they’ve received. The IRS will otherwise continue to process previously filed claims, albeit at a slower speed and with increased scrutiny.
Key takeaways
- The IRS has placed a moratorium on processing new ERC claims through at least the end of the 2023 calendar year.
- The IRS is currently working with the Justice Department “to address fraud in the ERC program as well as promoters who have been ignoring the rules and pushing businesses to apply.”
- Taxpayers who have submitted among the 600,000 unprocessed ERC claims will soon have an option to withdraw them. Another option will be available for taxpayers to repay refunds they have received to avoid penalties. However, taxpayers who have willfully submitted fraudulent claims can still be criminally investigated and prosecuted, even if such a claim is withdrawn.
- Taxpayers who have worked with a credit mill or otherwise claimed the credit on aggressive grounds should strongly consider reaching out to their tax advisor to discuss whether they should participate in the withdrawal and repayment programs that are under development. While the details are outstanding, they appear to be extremely taxpayer-friendly, particularly the option to repay without penalty.
- The IRS will otherwise continue to process previously filed claims, albeit at a significantly reduced speed and with increased scrutiny.
Despite numerous warnings from the IRS cautioning taxpayers against working with so called ERC credit mills (see our previous tax alert
