ERTC Moratorium: A Pause on Processing, not a Pause on Filing

On Thursday, September 14, 2023, the IRS issued an immediate moratorium on processing of new Employee Retention Tax Credit claims. The moratorium will extend “at least” until December 31, 2023 while the IRS investigates criminal cases and conducts audits of related claims. The IRS will continue to process claims submitted prior to the moratorium, but indicated those claims will be processed at a slower pace under increased scrutiny.

Background

The Employee Retention Tax Credit (“ERTC”) is a refundable tax credit established for businesses that paid employees during a full or partial suspension of the business due to a government order during COVID, or for businesses who had a significant decline in gross receipts during the credit’s eligibility period.  

Rationale Behind the Moratorium

The moratorium is the result of questions by the IRS and others surrounding potential compliance issues. In particular, the IRS is focused on “promoters” who have pushed excessive ERTC filings connected with large commissions earned for the promoters based on refunds.  The IRS has taken this approach in response to “dubious claims” by promoters that the IRS believes have resulted in the exponential growth in the number of fraudulent returns filed and refunds claimed.

What Now?

IRS Commissioner Danny Werfel said in the release that “In the meantime, businesses should seek out a trusted tax professional who actually understands the complex ERTC rules, not a promoter or marketer hustling to get a hefty contingency fee. Smith + Howard has invested a significant amount of time and resources to understand the complex ERTC rules in order to advise our clients as to their eligibility. We have a dedicated team of ERTC professionals, we are not promoters, and our fees are not contingent on the receipt or amount of the ERTC claim.

The IRS is concerned that most of the recent filings are ineligible. However, there are certainly still taxpayers who may be eligible under the specific IRS guidelines and who have not yet filed. Scott Whalen, Tax Partner and leader of the ERTC team notes that, “Eligible businesses shouldn’t be discouraged from filing refund claims to which they are entitled.” Nicole Davis, Senior Tax Manager adds, “We can continue to help clients assess and file refund claims even during this moratorium.”

If you have not yet filed an ERTC claim but want to know if you are eligible, or if you have already filed an ERTC claim and are concerned that you were not eligible, please contact us using the form below. We can walk you through the rules and help you determine the right course of action for your business. Please note that amended returns will need to be filed by April 2024 for 2020 claims (April 2025 for 2021 claims), so it is important to act now.

The full release from the IRS is available here.