On September 14, 2023, the IRS announced its next step in its attempts to curb widespread fraud around the Employee Retention Credit—an immediate and complete moratorium on processing new ERC claims through the end of the year.
You may have heard or seen the commercials by, or been spammed with emails from, companies encouraging businesses to contact them about applying for ERC credits. Generally, these companies will prepare the necessary amended employment tax returns claiming the credit for a contingent fee. The IRS has been overly concerned with these marketing companies who assist client’s in claiming credits to which the business is simply not eligible- even naming the industry in its 2023 “Dirty Dozen” list.
Believing ERC credits claimed at this late date are largely bogus, the IRS will stop processing any ERC claims submitted through the end of the year to allow the IRS to scrutinize more closely recently filed claims. In addition, they are working on a mechanism to allow Taxpayers to withdraw claims that have not yet been processed, as well as a way for Taxpayers who want to avoid an audit to voluntarily pay back refunds on already-processed claims.
With the IRS’s emphasis and focus on this area, Taxpayers who have claimed ERC credits should expect they will be audited and ensure they are prepared well in advance. The IRS has provided guidance on the documentation it will look for in an audit—Governmental Orders, financial statements, payroll records, etc.). To the extent such items are not already secured, Taxpayers should start gathering them now. If in this process, the Taxpayer determines they were not eligible for the ERC, it is best to address that issue before the IRS starts an audit, when penalties and some interest may be avoided.
If you have already received an ERC, and particularly if you used one of the ERC companies to file them, call one of the Denver Tax Attorneys at Anderson & Jahde to discuss whether you may be in jeopardy.