Employee Retention Credit (ERC) update: IRS won’t process new ERC claims

September 18, 2023

On September 14, 2023, the IRS announced an immediate moratorium on processing new Employee Retention Credit (ERC) claims. 

The moratorium is the result of IRS concerns about a flood of improper Employer Retention Credit claims – and will last at least through the end of this year.

In addition to the ERC moratorium, the IRS issued an announcement regarding Red Flags for Employee Retention Credit claims, as well as an updated set of  ERC FAQs and a new ERC Eligibility Checklist.

ERC background / Investigations of fraudulent ERC claims

The ERC was a refundable tax credit for businesses that paid workers during the COVID-19 pandemic while their operations were fully or partially suspended because of a government order - or for those that had a significant decline in gross receipts during the eligibility period.

As of July 31, 2023, the IRS Criminal Investigation Division has initiated 252 investigations involving more than $2.8 billion of potentially fraudulent ERC claims, with 15 of the 252 investigations resulting in federal charges, IRS Commissioner Daniel Werfel said. Six of those 15 have resulted in convictions. In addition, the IRS has referred thousands of ERC claims for examination.

What does the moratorium mean?

The IRS says that new ERC claims filed after September 14, 2023, will not be processed before the end of 2023. 

Previously filed claims will continue to be processed and approved payouts will continue; however, there will likely be enhanced scrutiny.

Also, during this period, existing ERC claims will go from a standard processing goal of 90 days to 180 days – and much longer if the claim faces further review or audit (as indicated above the IRS has referred thousands of ERC claims for audit.) 

Two new policies: Settlement Program and withdrawal option

In addition, the IRS moratorium announcement previewed two new policies, with details to follow.

  • a settlement program for repayments for those who received an improper ERC payment,
  • a special withdrawal option for those who have filed an ERC claim but the claim has not been processed. This option – which can be used by taxpayers whose claims haven’t yet been paid – will allow them to avoid possible repayment issues and paying promoters contingency fees.

Insights re: ERC claims / ERC information source

The IRS ERC claims moratorium is the latest of numerous recent announcements regarding ERC claims. See our prior blog posts - Catching up with IRS news and IRS to scrutinize aggressive Employee Retention Credit (ERC) claims.

For more IRS information regarding Employee Retention Credit claims visit the IRS's ERC website.

Please contact your Herbein tax consultant if you have questions regarding this article or Employee Retention Credit claims.

Articled contributed by David Peritz