IRS Suspends Review of New ERTC Claims until December 31, 2023
Due to the increasing flood of ineligible Employee Retention Tax Credit (ERTC) claims, the IRS has announced an immediate moratorium on processing new claims through the end of 2023. According to IR-2023-169, the purpose of the freeze is to allow the IRS more time to audit dubious claims and intensify criminal investigations of promotors and fraudulent claims.
What happens if your claim is already filed?
ERTC refund claims made prior to September 14, 2023, will continue to be processed, with the processing goal increasing from 90 days to 180 days more if further review is warranted. Based on these dates, the IRS would resume processing ERTC claims submitted after September 14, 2023, in January 2024. The IRS may have additional capacity to review and process legitimate ERTC claims because of the moratorium.
The IRS is concerned with protecting businesses from the aggressive advertising and marketing around the ERTC, which we’ve warned about in previous blog posts. Promotors pressure taxpayers to apply for the credit claiming there’s no risk in applying, even if it turns out they are ineligible.
Unfortunately, this is simply not the case.
Taxpayers who improperly receive ERTC funds are not only required to repay the funds but may also be subjected to interest and penalties.
The situation is made worse because many ERTC mills charge significant fees based on a percentage of the ERTC refund, but provide little substantiation for qualification or complete transparency regarding the ERTC rules, risks, and tax implications.
ERTC claim review
For this reason, it’s essential to ensure claims are properly prepared, and that the business or non-profit organization is eligible for the credit. The IRS has reported an increase in the number of claims purporting to qualify due to supply chain disruptions, but the truth is that only a small number of businesses are eligible under this provision as it applies in very narrow circumstances. Those claiming this provision may be at an elevated risk of audit. To protect against such issues, it’s important to consult with a qualified tax advisor.
New IRS resolution programs
The agency is developing new initiatives to help those who have been victimized by aggressive promoters, including a new settlement program and withdrawal option, which will be available this fall.
The withdrawal option will be available to those who have filed an ERTC claim but have not yet been processed. The program will allow claims that have not been paid to be withdrawn, avoiding possible repayment issues and the payment of processor contingency fees. It’s important to note those who have willfully filed a fraudulent claim will not be protected from criminal investigation and prosecution by using this program.
The new settlement program is designed to help those who have already received the credit but believe it was awarded in error. Although program details have yet to be published, it will allow affected companies to repay ERTC claims while avoiding penalties and future compliance actions. The IRS is still evaluating options for dealing with those who paid a promoter contingency fee out of ERTC funds.
Have questions? Contact us.
If you have questions about the information outlined above, Barnes Dennig can help. For additional information call 513-241-8313 or click here to contact us. As always, we’re here to help.