Congress introduced the Employee Retention Credit (ERC) during the COVID era as a tax benefit aimed at supporting businesses that continued to pay their employees amidst pandemic-related disruptions. While the ERC proved beneficial for numerous businesses navigating the challenges of the pandemic, the intricate workings of the program and the criteria for eligibility led to unscrupulous individuals urging ineligible companies to claim the credit. These promoters, driven by financial gain, are still active and persuading unsuspecting businesses to claim credits for a fee, which can be as high as 25% of the claimed amount.
Regrettably, if the Internal Revenue Service (IRS) discovers that an ineligible employer has availed the credit, the onus falls on the business to repay the credit along with accrued interest and penalties. Given the escalating number of potentially ineligible claims being submitted, the IRS is cautioning businesses to be vigilant against aggressive promoters who may mislead them regarding eligibility. The ERC has specific requirements for qualification, and many companies may not meet these criteria. If you encounter an offer to assist in claiming the credit, we encourage you to reach out to us before submitting any documents to the IRS. Our expertise allows us to evaluate your tax situation and ascertain your eligibility, potentially saving you from paying substantial upfront fees to unscrupulous promoters and the prospect of repaying the IRS.
IRS Moratorium on ERC Claims
Due to the overwhelming volume of ERC claims from potentially ineligible businesses, the IRS has temporarily halted the processing of new claims until at least January 1, 2024. This moratorium is essential for the IRS to thoroughly scrutinize the claims received, ensuring that the credit is not disbursed to businesses that do not meet the eligibility criteria. Consequently, there is a notable extension in the processing times for legitimate claims. While the IRS had previously processed ERC claims within 90 days, it now requires a minimum of 180 days, with the possibility of further delays if a claim undergoes additional review.
Process for Withdrawing ERC Claims
Recognizing the complexities surrounding ERC claims, the IRS has introduced a withdrawal process for employers who have already filed claims but have not yet received a refund. This process permits taxpayers who believe they were coerced or misled into filing claims to withdraw them while the IRS is still in the processing stage. Withdrawn claims will be treated as if they were never submitted, ensuring that taxpayers who opt for withdrawal won’t face repercussions for having filed. However, it’s important to note that taxpayers who willfully filed fraudulent ERC claims will not be exempt from criminal prosecution, even if they decide to withdraw their claims.