September 18, 2023

IRS Announces ERTC Processing Moratorium

Over the last few years, the IRS had been working through a large backlog of unprocessed returns, delayed taxpayers’ communications, and improperly mailed out notices. At the same time, there were significant customer service issues which made it extremely difficult to get telephone, and other types of support. These issues which had been plaguing the agency have been largely resolved. The $80B in funding provided through the Inflation Reduction Act provided the resources necessary to address these challenges. Now the agency is turning its attention toward the going problem of Employee Retention Tax Credit fraud.

The IRS announced last week (in IR-2023-169) a moratorium on processing new ERTC claims through the end of 2023. The reason for the change is the increase in the number of ineligible claims that are being filed. It appears many of these are coming from businesses that have been pressured and scammed by aggressive promoters and marketing firms. The agency will continue processing claims received prior to September 14^th but cautions it will now take longer due to increased fraud concerns. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.

Update Overview

The recent announcement signals a significant shift in terms of how the IRS will be processing ERTC claims. Not only will no new claims be processed, but existing claims will take longer to review. Due to stricter compliance reviews, it is estimated processing time will increase from 90 to 180 days or more if a claim is selected for further review or audit. These additional steps are not only essential to identifying fraud, but also to protect taxpayers from the penalties and interest arising from improper claims.  

Advice for Taxpayers

Given the change, the IRS has provided advice for taxpayers in different stages of the claim process, including:

• Waiting on ERTC Claim – For those with an open ERTC claim, do not worry as the IRS will continue processing claims during the moratorium. However, it is expected to take substantially longer than in the past. Many applications will be facing additional scrutiny which not only extends the processing time but will also impact when payments are disbursed. It is important to note the agency will not expedite individual claims.
• Not Filed a Claim – Companies that have yet to file a claim should carefully review the eligibility criteria. It is suggested to work with a trusted tax advisor, such as Wilson Lewis, and not a promoter or marketing company that makes money based on applications submitted. This will help to ensure the claim is legitimate and the business has satisfied the complex eligibility criteria.
• Withdrawal an Existing Claim – For those with an existing claim, it is important to review it with a trusted tax professional during the moratorium period. It has been reported many applications are improperly citing supply chain issues as the basis for making a claim. Unfortunately, most will not qualify because it very narrowly applies to companies in certain circumstances. In any case, taxpayers that have claimed the credit, and it has not been processed or paid, can withdraw the claim if it has been determined to be improperly submitted. It is important to note a withdrawal can be made even if a case is awaiting or is currently under audit. More details about this program will be released shortly.

There will also be a new settlement program announced in autumn which will allow businesses to repay the claim with limited penalties.

Contact Us

The recently announced moratorium means taxpayers will have to wait substantially longer to have claims processed. This does not mean an eligible Georgia company should not file a legitimate claim. If you have questions about the information outlined above or need assistance with an ERTC claim review, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.