On Sept. 14, 2023, the IRS announced a stoppage on processing new employee retention credit (ERC) claims until at least 2024. The stoppage seeks to protect public revenues against fraudulent claims pushed by ERC promoters, as well as to protect businesses from penalties and/or interest assessments due to such fraudulent claims.
Additionally, the press release introduced two IRS initiatives that will be released in the coming months. First, the IRS is working on a settlement program for the repayment of improper ERC claims. This will likely be similar to previous IRS voluntary disclosure programs, as the IRS’ stated goal is to allow “businesses to avoid penalties and future compliance action.” The IRS highlighted that one issue it is still considering is whether/how to account for any ERC contingency fees paid by the taxpayer as part of any settlement.
The second initiative aims to provide a withdrawal option for taxpayers who have filed an ERC claim that has not yet been processed. This option will allow taxpayers to avoid possible repayment issues and paying promoters contingency fees (which are generally only paid once a refund is received), and it is expected to include all 600,000 claims in the IRS’ processing queue. However, the IRS warned that it believes withdrawing an ERC claim under this program would not exempt taxpayers from potential criminal exposure if they filed a fraudulent claim.
For taxpayers that have already filed — and don’t withdraw or have their claim denied — the IRS noted that payouts for the ERC will continue during the moratorium period but at a slower pace due to the mandatory detailed compliance reviews.
- For taxpayers who have not yet filed for the ERC, consider reviewing the guidelines and waiting to file.
- For taxpayers who have already filed but whose claims have not yet been processed, carefully review the program guidelines with a trusted tax professional.
- If it is determined that an improper ERC claim has been filed, consider withdrawing the claim.
- For taxpayers who have already received the ERC, review the program guidelines and if determined to be improper, wait for the IRS ERC settlement program to be finalized to allow businesses to repay ERC claims.
- For taxpayers who have already filed (regardless of status), be prepared to act quickly upon future IRS announcements, because the IRS may impose short relief periods.
Please contact your Mazars professional for additional information.
Ryan Vaughan, Partner
Andrew Greiner, Manager
The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.