IRS Announces Moratorium on New ERC Claims Processing Until 2024

General Overview

The IRS issued a news release on September 14, 2023, stating that it is imposing an immediate moratorium on processing new Employee Retention Credit (ERC) claims. Under the moratorium, new ERC claims will not be processed until sometime after December 31, 2023.  

The IRS believes that the moratorium is needed because of a “flood of improper claims.”  The IRS also expressed concern that taxpayers need to be protected from “being pressured and scammed by aggressive promoters and marketing.” The IRS reminded taxpayers that any improperly received ERC payments must be repaid and may be subject to interest and penalties. Taxpayers who paid large contingency fees may face more difficulties repaying the full amounts received.  

The IRS will continue to process existing claims during this time. ERC claims currently awaiting processing will be subject to increased compliance scrutiny. The processing time goal for current ERC claims will be increased from 90 days to 180 days, with the potential for a significantly longer time if the IRS determines further scrutiny or documentation is necessary. The IRS cautioned that wait times for refund payments for existing claims will also be increased.

The news release also referenced two additional new IRS resources for taxpayers to consult before submitting an ERC claim. 

IRS Advice for Taxpayers

The IRS provided advice regarding steps to take during the moratorium for: (i) taxpayers who have not yet filed ERC claims; (ii) taxpayers with unprocessed claims, and (iii) taxpayers who have already received ERC payments.

Taxpayers Who Have Not Yet Filed ERC Claims

The IRS advised taxpayers who have not filed a claim to review the ERC guidelines during the moratorium with a trusted tax professional. The news release stressed that “avoiding a bad claim will avoid complications with the IRS.”

Taxpayers with Unprocessed Claims

Taxpayers who have already filed a claim that has not been processed or paid should review their eligibility during the moratorium with a trusted tax professional. For example, claims made due to supply chain issues rarely meet the eligibility criteria.

The IRS will be creating an option for taxpayers to withdraw their claims if they determine they are ineligible, even if the claim is already under audit or awaiting audit. The IRS intends for this to allow taxpayers who may have been misled by promoters to avoid possible repayment issues and paying promoters contingency fees. However, the IRS cautioned that withdrawing a claim would not protect those who willfully filed fraudulent claims or conspired to do so from potential criminal investigation and prosecution.

Taxpayers Who Have Received ERC Payments

The IRS advised that a new settlement program for repayment of improperly received ERC payments will be available in the fall. Taxpayers who have already received ERC payments for which they now believe they were ineligible may be able to take advantage of the program. The program is expected to allow taxpayers to repay ERC claims and avoid penalties and future compliance actions. In addition, the IRS is assessing options for taxpayers that paid a contingency fee out of their ERC payments.

Additional New IRS Resources 

New ERC Guidance

The IRS also announced updates to ERC guidance with the launch of a new question and answer guide. The new guide consists of a checklist for taxpayers to determine if they are eligible for the credit.

Taxpayers Reminded to Look for Red Flags 

Contemporaneously, the IRS also issued a news release listing numerous red flags that taxpayers should be on alert for regarding aggressive promotions for the ERC. Taxpayers are advised to be wary of any promoter claiming an “easy application process” or eligibility before any discussions with the taxpayer. Taxpayers are also warned against promoters charging large upfront fees or a fee equal to a percentage of the refund claimed.