Public Service Announcement – IRS Moratorium on Employee Retention Credit Claims (“ERC”) and What it Means for You
Unless you’ve been living under a rock, most people have heard about the COVID era credit for employers who kept their businesses open and employees working. A common tagline was “You could qualify for a credit of up to $26,000 per employee.” Which is true. Unfortunately, the IRS was flooded with claims, often prepared by what are called ERC Mills. I think by last count there was somewhere between 1 million to 2 million claims pending.
The IRS, rightly concerned about fraud, decided to halt the processing of claims as of September 14th, 2023. All claims submitted on or after the 14th will not be processed. Prior claims will be processed but could take considerably longer to be acted on. The IRS has not yet stated when the moratorium will end but it may be sometime early 2024.
So, what can you do?
Options During the Moratorium
If you’ve filed a claim already then you can: 1) do nothing or 2) withdraw your claim (more on that later). If you haven’t filed a claim, then you can either: 1) do nothing and wait or 2) file a claim with the understanding it won’t be processed until after the moratorium. WARNING: there is a deadline to file some claims next year. You would do well to talk with your adviser to find out if you need to file or not to protect your claim.
If you have a potentially bad claim or are concerned your claim may have issues – you can withdraw it. Not sure if your claim is good? Here is a link to the IRS website where there is a wealth of information about ERC eligibility: Employee Retention Credit | Internal Revenue Service (irs.gov)
Regardless of the reason, withdrawal of your claim can be done by faxing or mailing the IRS some paperwork (details of the withdrawal process is here). Just be aware that you can only withdraw a claim if you meet the following requirements:
- It must be filed on an amended tax return;
- The amended return must be filed to only claim the ERC and make no other changes to the return;
- You must withdraw the complete claim, meaning no partial withdrawals, for that quarter (so you to file a withdrawal for each quarter for which you want to remove the claim); AND
- You have not received and deposited any refund check related to an ERC claim.
Please note that if a fraudulent claim was filed that does not mean that the IRS cannot pursue criminal charges. The reason for this is that the act of filing a fraudulent claim is a crime regardless of whether or not the claim is acted on.
Summary
Be careful out there. ERC Claims are a huge area of fraud right now and the IRS is actively pursuing companies and tax preparers. If you have an ERC claim, you should talk with your tax adviser or someone who handles ERC claims to make sure you are not at risk of an IRS audit (or worse IRS criminal prosecution).
James D. Wade, Esq.
Beacon Tax Advocates, LLC
57 Portland Road, Ste. 3
Kennebunk, ME 04043
207-502-7181
jwade@beacontaxadvocates.com
www.beacontaxadvocates.com