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IRS Implements Urgent Halt on New Employee Retention Credit Processing

Business owners are urged to exercise caution when applying for the Employee Retention Tax Credit (ERTC), as many may not qualify. The IRS, in response to concerns over an influx of improper claims, has implemented an immediate halt to processing new claims for the relief program. This moratorium, set to last until at least December 31, 2023, aims to shield honest small business owners from potential scams and fraudulent claims.

Promoter Pressure: IRS Commissioner Danny Werfel has taken action to curb the influx of ineligible ERTC claims. Aggressive promoters and marketers are pressuring businesses, putting them at financial risk. Werfel advises businesses to seek advice from trusted tax professionals with a deep understanding of ERTC rules, rather than relying on promoters.

Special Withdrawal Option in The Works: The IRS is finalizing a special withdrawal option for those who have filed ERTC claims but haven't seen them processed. This option will provide relief to businesses, particularly small ones misled by promoters, and help them avoid potential repayment issues and contingency fees.

Willfully Filed Fraudulent Claims: Businesses that have knowingly submitted fraudulent claims should be aware that withdrawing such claims won't necessarily exempt them from potential criminal investigations.

Proper ERC Claims: When properly claimed, the ERC (or ERTC) is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 pandemic. Eligibility is contingent on factors like government-issued restrictions or a significant decline in gross receipts.

Improper Claims: Improperly claimed ERTC must be repaid, potentially with penalties and interest. It's crucial for businesses to independently verify their eligibility before applying through a promoter, as promoters can charge up to 25% in contingency fees.

Advice for Taxpayers:

  1. Currently Awaiting an ERC Claim: Expect longer processing times, potentially up to 180 days or more, due to increased compliance scrutiny.

  2. Haven’t Filed a Claim Yet: Review ERC guidelines carefully and consult a trusted tax professional.

  3. Withdrawing an Existing Claim Already Filed: Consult with a professional to review your business’s qualifications for the ERC.

  4. Wait For the IRS ERC Settlement Program to Be Finalized: Details on the settlement program will be available in the fall, allowing businesses to repay ERC claims without penalties.

ERC Qualifications: Employers must meet specific criteria, such as a government-ordered suspension of operations or a decline in gross receipts, to be eligible for the ERC.

Whether you're considering, awaiting, or have already filed an ERTC claim, our office can assist in verifying your qualifications and guide you through the necessary steps.

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