The IRS has entered the next stage of its work on the Employee Retention Credit (ERC), following a comprehensive review that indicated a significant majority of claims are at risk of being improper. To address this, the IRS plans to deny tens of thousands of high-risk claims while focusing on processing lower-risk claims to assist eligible taxpayers. This effort aims to protect taxpayers and small businesses from improper claims and potential fraud.
In light of the large inventory and the ERC review results, the IRS will maintain the processing moratorium on ERC claims submitted after September 14, 2023. IRS Commissioner Werfel explained, "We decided to keep the post-September moratorium in place because we continue to be concerned about the substantial number of claims coming in so long after the pandemic. These claims are clogging the system for legitimate taxpayers. We worry that ending the moratorium might trigger a gold rush by aggressive marketers, leading to a new round of improper claims, which would be detrimental for taxpayers and tax administration." During this period, the IRS will consult with Congress and other partners to discuss the future of the ERC program, including the possibility of closing new claims entirely and extending the statute of limitations to allow more time to pursue improper claims.
Read more on the IRS website or contact an Axley & Rode advisor for assistance.
Help for businesses with eligibility questions and those misled by promoters
Some promoters told taxpayers every employer qualifies for ERC. The IRS and the tax professional community emphasize that this is not true. Eligibility depends on specific facts and circumstances. Key IRS materials to help show taxpayers if they have a risky ERC claim include:
- ERC Eligibility Checklist (interactive version and a printable guide) includes cautions about common areas of misinformation and links to facts and examples.
- 7 warning signs ERC claims may be incorrect outlines tactics that unscrupulous promoters have used and why their points are wrong.
- Frequently asked questions about the Employee Retention Credit includes eligibility rules, definitions, examples, and more.
