Following excessive numbers of scams connected to businesses applying for the Employee Retention Credit (ERC), the Internal Revenue Service (IRS) announced that it was placing a moratorium on processing new ERC claims.
The IRS recently issued a warning regarding these scams and the dangers associated with applying for an ERC when ineligible.
Now, due to the rising numbers of improper claims, the IRS has elected to stop processing new claims through at least the end of the calendar year. The IRS will continue to process claims that it has already received, but is implementing stricter compliance reviews, and standard processing will go from 90 days to 180 days, and possibly much longer. The IRS may also request additional documentation from taxpayers before issuing a credit.
The IRS also emphasizes that submitting an inaccurate ERC claim is not risk free, as some promoters advertise. If a business receives a credit it is not eligible for, the business will be required to repay the credit and may be assessed penalties and fees.
The IRS is now also working with the Justice Department to address ERC fraud. At this time, over 250 investigations have been initiated, some of these investigations have resulted in federal charges and convictions for fraud.
We recommend contacting your trusted Liebert Cassidy Whitmore attorneys if you have entered into, or are considering entering into, a contract with a company offering assistance with determining ERC eligibility to help you understand any potential risks and to better protect your organization.
The full IRS news release can be found here.