Over the past few months, the IRS has issued increased warnings urging taxpayers to beware of ads that promise big money by claiming the employee retention tax credit (ERC). On September 14, the agency progressed from warnings to action, issuing an immediate moratorium on processing new ERC claims through the end of 2023.
In IR-2023-169, the IRS notes, “aggressive marketing to ineligible applicants highlights unacceptable risk to businesses and the tax system.” The agency will utilize the moratorium to allow the addition of increased safeguards to prevent future abuse of the ERC program and to work with the Justice Department to pursue fraud.
Answers to all taxpayer questions are not immediately evident in this developing situation, but here's what we know:
The ERC program is under an immediate moratorium through at least the end of 2023 on processing new claims.
The IRS will continue to work on previously filed ERC claims received prior to the moratorium but emphasize that the standard process goal of 90 days will shift to 180 days due to detailed compliance reviews.
Hundreds of criminal cases are already in the works and thousands of ERC claims have been referred to audit.
The IRS is developing new initiatives for businesses, including a settlement repayment program for taxpayers who received an improper ERC payment. More details will be available this fall.
The IRS Criminal Investigation Division is actively working on identifying fraud within the ERC program. As of July 31, IRS-CI has initiated 252 investigations of ERC fraud involving $2.8B of potentially fraudulent ERC claims. Fifteen of those investigations have already brought federal charges, with the average sentencing on ERC related convictions being 21 months.
As further guidance is issued, our Credits & Incentives team will continue to monitor the situation and provide updates. If you have any questions, please get in touch with Matt Werner or Ross Alessandro at Schneider Downs & Co., Inc.
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