The IRS recently announced an immediate moratorium on processing new Employee Retention Tax Credit (ERTC) claims. This decision comes in the wake of rising concerns over fraudulent applications and will be effective until at least the end of the year.

Despite the moratorium, the IRS confirmed it will continue to process claims submitted before this decision. However, businesses should be prepared for more scrutinized reviews and extended processing times, with some claims taking up to 180 days or more to be evaluated.

As of now, the IRS has received 3.6 million ERTC claims. Out of these, around 600,000 claims, predominantly from the last 90 days, are still in open inventory and pending review. That represents 15% of all ERTC claims since the program started.

IRS Commissioner Danny Werfel expressed concern over fraud within the ERTC program, noting that scams are negatively impacting well-intentioned businesses and the broader tax system.

It's imperative for businesses to understand that this pause on ERTC claims processing does not indicate an end to the program. Those who believe they qualify can and should still continue to apply, keeping in mind the extended timelines.

The IRS implemented its processing moratorium to combat suspected fraud or questionable claims endorsed or prepared by certain advisors who are either unfamiliar with the eligibility rules or are blatantly ignoring those rules. Therefore, consulting with an experienced tax professional who understands the complexities of the ERTC is crucial.

The IRS also provided new frequently asked questions and a freshly released Q&A guide to assist employers with the determination of eligibility. This is to ensure employers have the necessary information to understand if they're truly eligible for the credit.

The IRS plans to introduce a settlement program to help businesses tricked by deceitful promoters. It will also offer businesses a chance to withdraw any pending claims, helping them avoid potential repayment problems.

To strengthen its fight against fraud, the IRS also is collaborating with the Justice Department and training auditors to identify high-risk fraudulent claims targeting both the individuals filing them and those promoting them.

The IRS's Criminal Investigation Division revealed that potential COVID-19-related fraud amounts may exceed $8 billion. As of July 2023, 252 of these investigations focusing on $2.8 billion in questionable ERTC claims have been launched, leading to 15 federal charges and six convictions, with convicts serving an average of 21 months.

Additionally, the IRS is actively auditing ERTC cases, and is closely examining thousands of suspicious claims.

Next Steps

Having a defensible stance for your ERTC claim is crucial. At CBIZ, our experienced tax professionals are well-versed in the ERTC program, offering guidance tailored to your organization's unique situation to maximize the credit. Connect with us today for expert assistance with the ERTC.

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