Contrary to many headlines, the IRS has not eliminated the Employee Retention Credit.
Have you had the chance to peruse the latest IRS memo about the ERC? We’re here to break it down for you in this ever-evolving landscape of the Employee Retention Credit:
Key Points Noted By The IRS in IR-2023-169, Released Sept. 14, 2023
Delays One of the most pressing concerns is the timing of ERC claim refunds. Previously, the internal processing time at the Service for ERC claims averaged around 90 days. Due to recent changes, this timeline is expected to double, with their internal goal increasing to about 180 days. Furthermore, cases that require additional review or audit will experience even more extended delays.
Pause The IRS has placed a moratorium on all new ERC claims not received at the Service prior to 9/14/23. Those currently in processing will continue (but at the slower pace noted above). And those not yet received will not be processed until at least 1/1/24 when it is anticipated that the IRS will re-open processing.
Why the Change? The reasoning the IRS gave for their hold on new claims and longer wait times on existing claims is related to fraud. The Service has been strengthening its response to fraudulent activity related to ERC claims in a series of memos, even listing ERC scams as #1 on its annual Dirty Dozen list. The IRS has become increasingly alarmed by the rising number of honest small business owners falling victim to unscrupulous actors who are exploiting the system. In response, they have taken measures to address this issue and protect legitimate claimants.
Statistics on Fraud To emphasize the severity of the situation, consider these statistics as of July 31, 2023: IRS Criminal Investigations have initiated 252 investigations involving over $2.8 billion of potentially fraudulent Employee Retention Credit claims. Of those, fifteen investigations have resulted in federal charges, with six of them leading to convictions. In these cases, the average sentence has been 21 months. These numbers underscore the IRS's determination to combat fraudulent claims.
What Can You Do? If you suspect that you previously filed an ineligible ERC claim, it's crucial to take action immediately. Contact us to review your situation and assess your eligibility. It's not too late to rectify any potential issues and ensure compliance with the law and IRS guidance.
Is There Still Time To Claim The ERC? If you believe you may be eligible for the ERC but still need to file a claim, don't wait any longer. Reach out to us now so we can evaluate your eligibility and prepare your submission for when claim processing reopens. Being proactive in this regard can help you secure the support your business deserves. "In the meantime, businesses should seek out a trusted tax professional who actually understands the complex ERC rules, not a promoter or marketer hustling to get a hefty contingency fee. Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution.” There is still a statutory deadline of 4/15/24 for 2020 Employee Retention Credit claims. We are continuing to process ERC studies for businesses that are eligible. If you have not claimed the ERC yet and are planning to look into it, now is the time. At this point, waiting any longer to claim the credit does not make sense. Once processing reopens on 1/1/24, you will have 3 months to get your claim in before the 2020 ERC window closes.
We Are Here To Help
Staying informed and taking proactive steps to address any concerns is crucial to navigating these changes successfully. If you have questions or need assistance, don't hesitate to reach out to us – we're here to help you make the most of the Employee Retention Credit while ensuring compliance with regulations.