There has been growing concern over Employee Retention Credit (ERC) claims filed by unqualified business owner applicants fueled by a surge in scammers encouraging ineligible business owners to file claims. Honest business owners are plagued with aggressive broadcast advertising, direct mail solicitations, and online promotions for this credit. Many of these ads misrepresent who can qualify for the ERC, which is sometimes also called ERTC or the Employee Retention Tax Credit.
In response, the Internal Revenue Service (IRS) announced an immediate stop to processing new ERC claims starting September 14 through the end of the year.
IRS Commissioner Danny Werfel, who ordered the moratorium on ERC processing, said “The continued aggressive marketing of these schemes is harming well-meaning businesses and delaying the payment of legitimate claims, which makes it harder to run the rest of the tax system. This harms all taxpayers, not just ERC applicants.”
The IRS, tax professionals, and the media raised concerns that a substantial share of new claims from the COVID relief program are from businesses that are not eligible to receive the ERC. The IRS is now reviewing thousands of ERC claims and increasing audit work and has commenced hundreds of criminal investigations on the fraudulent ERC promoters. Payouts for eligible claims will take longer as processing will increase from 90 to 180 days.
Businesses that are approached with high-pressure tactics to apply for the ERC and pay a contingent fee should exercise caution. The IRS intends to introduce programs in the coming weeks and months to help taxpayers who have fallen victim to an ERC scam.
For advice on dealing with ERC scammers, read the IRS bulletin Learn The Warning Signs Of Employee Retention Credit Scams.
If you have questions about how this may affect your personal situation, please reach out to your CironeFriedberg tax professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Darien) or email us at firstname.lastname@example.org.