New IRS Guidance on ERC Claims Process

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New IRS Guidance on ERC Claims Process

September 15, 2023

New IRS Guidance on ERC Claims Process

The Internal Revenue Service (IRS) has ordered an immediate stop to the processing of new claims for the Employee Retention Credit (ERC) in order to prevent future abuse of the program. This decision comes in response to a surge of questionable claims and concerns from tax professionals. The IRS has observed aggressive marketing to ineligible applicants, which poses an unacceptable risk to businesses and the tax system.

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…

IRS Commissioner Danny Werfel

The moratorium on processing new claims will be in effect until at least the end of the year and will allow the IRS to implement additional safeguards to prevent future abuse and protect businesses from predatory tactics. While the IRS continues to process previously filed ERC claims, the increased concerns of fraud mean that processing times will be longer. The IRS will be conducting compliance reviews of existing claims to ensure their legitimacy and protect businesses from penalties or interest payments associated with improper claims. The IRS is also working with the Justice Department to address fraud in the ERC program and crack down on promoters who are ignoring the rules.

Taxpayers are advised to review IRS guidance and tools to determine their eligibility for the ERC. The IRS is developing initiatives to help businesses victimized by aggressive promoters, including a settlement program for repayments and a special withdrawal option for those with pending claims. The IRS notes, however, that withdrawing a fraudulent claim will not exempt individuals from potential criminal investigation and prosecution.

We will continue to monitor the guidance from the IRS and encourage you to read the full news release from the IRS regarding this matter.

if you are concerned you have received an ERC in error, the IRS is developing a settlement program, allowing businesses to repay claims without penalties and future compliance action. We will provide more information on that as soon as it is available.