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Processing of Employee Retention Credit Halted After Submission of Questionable Claims


The IRS recently announced that it would be placing a moratorium (through the end of the year) on the processing of all new claims for the Employee Retention Credit. The announcement came after it was revealed that aggressive marketing to ineligible applicants had resulted in a surge of false claims. The agency plans to use the rest of the year to implement more safeguards to prevent abuse and protect businesses from these kinds of predatory tactics.

The Employee Retention Credit 

The Employee Retention Credit (ERC) was introduced as a pandemic-era relief program to help small business owners who continued paying their employees even though:

  • Their operations were either fully or partially suspended due to government orders; or
  • Their business experienced a significant decline in their gross receipts during specific eligibility periods.

As a refundable tax credit available to businesses and tax-exempt organizations, the benefit helped companies whose employees were affected by the COVID-19 pandemic. Unfortunately, aggressive promoters have begun using false marketing tactics to pressure small business owners across the country into submitting ineligible claims.

Moratorium on Future Claims 

While the agency will continue to assess any ERC claims that were received prior to the issuance of the moratorium, taxpayers have been warned that concerns about fraud will cause processing times to be even longer. Because of stricter compliance reviews, for instance, existing ERC claims could take up to 180 days to be resolved. In the meantime, thousands of ERC claims have been referred to audit and a number of promoters are under criminal investigation.

Pressure to Apply 

Recent IRS investigations into many ERC claims revealed that unscrupulous promoters have been pressuring small business owners to apply for the credit. To avoid being taken advantage of in such a way, the agency is encouraging business owners to work with qualified tax professionals rather than promoters and marketers who may only be looking to obtain a contingency fee. Companies that receive ERC payments despite not qualifying could be required to reimburse the IRS for those payments and could face other penalties. Fortunately, the IRS is developing a new initiative to help companies that have been victimized by unscrupulous ERC promoters. As a part of this initiative, for instance, the IRS is creating a settlement program to help taxpayers who received an improper ERC credit satisfy their repayment obligations. The agency is also intending to design a withdrawal option for those who have filed ERC claims, but whose claims have not yet been processed and who were misled by promoters.

Here to Help with Your Tax-Related Needs 

Although the ERC was created to help small business owners during the pandemic, these same companies are now being taken advantage of by unscrupulous marketers and promoters. To avoid filing a false ERC claim and facing the penalties that go along with it, please call Ronald Cutler, P.A. and set up a meeting with a CPA, a former FBI Special Agent, and a dedicated Florida and nationwide tax attorney today. You can reach us at 386-490-9949 or by sending us an online message.