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IRS Announces Halt on ERC Processing in Light of Ongoing Scams

September 19, 2023

As a result of a surge of questionable Employee Retention Credit (ERC) claims, the Internal Revenue Service has put an immediate stop to processing new ERC claims. Here’s what you need to know.

Effective September 14, 2023, the IRS has mandated an immediate moratorium on processing new ERC claims through the end of this year. We have the details here.

What is the Employee Retention Credit?

The Employee Retention Tax Credit (ERC) is a refundable tax credit based upon qualified wages an employer pays to its employees applied against certain employment taxes (Social Security, Medicare, etc.)

Generally, there are 2 ways to qualify for the credit –

  • The 1st criteria – You experienced a full or partial suspension of operations during 2020 or 2021 because of governmental orders limiting commerce and impacting your business.
  • The 2nd criteria – You had at least a 50% decline in gross receipts in any calendar quarter in 2020 compared to the same quarter in 2019 (20% decline in gross receipts in any calendar quarter in 2021 (or Q4 2020) compared to the same quarter in 2019).

What is the scam?

Certain companies are advising applicants they may be eligible for the ERC while relying on improper eligibility positions and criteria. Check out our blog, Employee Retention Credit Schemes: On the Radio, Through the Mail and In Your Inbox! for more information.

What’s new effective September 14, 2023?

Due to a surge in fraudulent claims for the ERC, the IRS has placed an immediate halt on processing any new ERC claims received. This halt will continue through at least the end of 2023.

The IRS has been inundated with questionable ERC claims, which slows down work on legitimate ERC claims and other important tax matters. According to the IRS Criminal Investigation Division, as of July 31st they have conducted 252 investigations with more than $2.8 billion of possibly fraudulent ERC claims. Additionally, the IRS is working with the Justice Department to address fraudulent claims as well as investigating ERC promoters who have been ignoring the rules or providing inaccurate information about the program to business decision makers. IRS Issues New Guidance on ERC and Supply Chain Disruptions

What if you have an ERC claim waiting for review?

ERC claims still waiting for IRS review are to receive a more intensive, 180 day review (as opposed to the typical 90 day review period). Be sure to have support for eligibility and calculation of the credit in your files. Our blog, IRS Sends Out Examination Letters about ERC Claims has more details.

What should you do if you’ve fallen victim to an ERC scheme?

Were you pushed to file a false claim? The IRS is developing new initiatives to help address the situation. You will have a chance to withdraw a pending claim from the IRS if your claim has not yet been paid. Also, if you believe to have received an ERC refund claim and were not eligible, you will be able to enter a settlement program with the IRS

Wondering if you qualify or if you possess proper support for your ERC claim? We can help.

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