September 15, 2023

IRS Pauses on Processing New Employee Retention Tax Credit (ERTC) Claims in Response to Fraud and Aggressive Promoters

The IRS issued a moratorium on processing new Employee Retention Tax Credit (ERTC) claims on September 14, 2023. The moratorium, which took place effective immediately and will last through December 31, 2023 at least, comes as the IRS seeks a way to protect honest small business owners from scams.

Key Takeaways:

  • The program is not cancelled, but as of September 14, 2023 and lasting through at least December 31, 2023, the IRS will no longer accept new ERTC claims
  • Claims that have already been filed but not processed are expected to be significantly delayed
  • The IRS is working on options for businesses that filed an ineligible ERTC claim without subjecting them to additional penalties

Reasoning Behind IRS Moratorium

Aggressive promoters and marketers have pushed some businesses to submit a claim for the pandemic-era relief program despite their ineligibility. Previously filed ERTC claims received before the moratorium was enacted will be processed, but the federal tax agency has warned that fraud concern means processing times will be longer.

IRS Commissioner Danny Werfel explained, “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.”

Werfel added, “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.”

New Initiatives for Victims of Aggressive ERTC Promoters

Additionally, the IRS is in the process of developing new initiatives for businesses victimized by aggressive ERTC promoters, including a settlement program for businesses that received an ERTC payment they weren’t qualified for, allowing them to repay the funds without fines or penalties.

The IRS is also working on a special withdrawal option for businesses that filed an ERTC claim that hasn’t been processed yet. If a small business was misled by promoters, they may be able to use this option to avoid potential issues with repayments and paying the contingency fees for the promoter.

“For those people being pressured by promoters to apply for the Employee Retention Credit, I urge them to immediately pause and review their situation while we look to add new protections and safeguards to stop bad claims from ever coming in,” Werfel said.

As a way to further protect taxpayers from aggressive ERTC scams, the IRS is working with the Justice Department to address fraud in the program and promoters who have ignored the rules and pushed businesses to apply for ERTC when they don’t qualify.

Due to this new IRS guidance, Anders will no longer be accepting new ERTC clients until the IRS issues additional guidance related to this moratorium and the options available to affected businesses. The Anders CARES Act Consulting team will continue to monitor updates from the IRS concerning the Employee Retention Tax Credit to keep our clients informed. Check out our CARES Act Relief Radar for all pandemic relief-related funding updates.

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