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From now until the end of 2023, at the earliest, the IRS has announced that they will delay the processing of any new claims for the Employee Retention Credit (ERC) program. The employee retention credits were established through the CARES Act as a refundable tax credit for companies impacted during the pandemic. For many business owners, the employee tax credit offered immense value during difficult times. This moratorium put in place by the IRS significantly impacts multiple parties, including those who previously submitted a claim and those who still need to file. 

IRS Commissioner Danny Warfel stated, “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.” 

Here’s what you need to know about claiming employee retention credits. 

Existing Claims Being Processed

The IRS will still be processing claims for the employee retention tax credit that were submitted prior to the moratorium but has communicated that taxpayers should expect delays. The agency warns that many of the recent claims are ineligible and are putting businesses at risk. These delays could double the time to receive refunds as a more detailed review process will be implemented to ensure companies do not accept refunds for improper claims. In addition, the IRS may be reaching out to taxpayers for additional documentation to substantiate these claims before processing any refunds.  

A special withdrawal program is being finalized for taxpayers who feel they were misled by ERC promoters but have yet to receive payment. This program intends to protect taxpayers from possible repayment issues and promoters’ contingent fees but will not protect taxpayers who willfully made fraudulent claims. 

For Claims Not Yet Filed

If you are considering filing an ERC claim, the IRS recommends that businesses closely examine the ERC guidelines while the moratorium is in effect. The IRS also suggests that companies watch out for and avoid third-party promoters who may mislead businesses with false promotions. Businesses are advised to consult a reliable tax professional rather than a promoter or marketing company with little experience or knowledge of tax law and the complex rules of the ERC program. Ensuring proper eligibility with a tax professional will avoid the high penalties for taxpayers who incorrectly claim these credits. 

For Claims Already Paid

The IRS is working to develop a settlement program for taxpayers who were victimized by aggressive ERC providers. As mentioned above, these programs are intended to help honest businesses and will not protect taxpayers from criminal investigations for purposefully making fraudulent claims. Concerned taxpayers should reach out to an experienced tax professional to review any ERC claims they were persuaded into claiming by an aggressive ERC provider. 

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