ERC Suspended
The IRS has recently announced that it will temporarily suspend the processing of new applications for the Employee Retention Credit through at least the end of the year. The reason the IRS provided for this decision was the increase in fraudulent claims for the ERC. Another reason stated for this decision was scam protection for the business owners.
Fraudulent Claims
In their announcement the IRS said that currently they are processing previously filed ERC claims that were received before their moratorium. Unfortunately, due to their increased concerns about fraud, the IRS warns that the processing times will be longer. IRS processing goal for the ERC claims will go from 90 days to 180 days. On July 26, the IRS announced that it was shifting its focus to review these claims for compliance issues. This includes intensifying audit work and criminal investigations on promoters and businesses that have filed dubious claims. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.
Moreover, the IRS is in the process of finalizing details for a special withdrawal option. The option will be available soon for those who have filed an ERC claim but have not yet had their claim processed. This option can be utilized by taxpayers whose claims have not yet been paid. As a result, it will allow businesses to avoid potential repayment issues and the need to pay contingency fees to promoters. This option will be available to the filers of more than 600,000 claims that are currently awaiting processing. However, the IRS warns that those who have knowingly filed fraudulent claims or conspired to do so will not be exempt from potential criminal investigation.
If You Did Not File A Claim Yet
If you did not file a claim yet, we advise you to consult with a CPA, instead of hiring a tax promoter or marketing firm looking to profit from generating applications that charge contingency fees. You can see some of the warning flags regarding these aggressive promoters by clicking here. A CPA or an enrolled IRS agent should not charge you a fee based on the amount of the refund. The IRS also has a helpful guide with questions and answers regarding ERC, that you can see by clicking here.
If You Currently Have A Pending Application
In the case you currently have a pending application with the IRS, but the IRS did not process or pay the claim, the IRS recommends that you carefully review the program guidelines with a trusted tax professional, like a CPA and check the new question and answer guide. If you believe you submitted the claim improperly, even if your case is already under audit or awaiting audit, the IRS will allow you to withdraw your claim.
If You Received The ERC
In the case that you have already received an ERC that you now believe you claimed in error, the IRS intends to provide a settlement program that will allow you to repay the ERC claim. Per the IRS this settlement program will enable businesses to avoid penalties and future compliance action.
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This material is for informational purposes only. It does not constitute tax, legal or accounting advice.