On September 14, 2023, the Internal Revenue Service (IRS) declared an immediate suspension of the processing of new claims for the Employee Retention Credit (ERC) until at least 2024.

This temporary hold does not discourage employers from assessing their eligibility for the ERC, documenting their qualification, computing the credit, or submitting an amended Form 941X to claim the relevant credit. Although fresh ERC claims won't undergo processing for the remainder of 2023, they will be queued for processing when the IRS resumes operations in early 2024.

As a reminder, the ultimate deadline for submitting an ERC refund claim for 2020 is April 15, 2024, and for 2021, it is April 15, 2025. It is advisable to submit filings well in advance of these deadlines to ensure the IRS receives and processes the claims promptly.

Reason for the Temporary Pause: The IRS has instituted this temporary suspension due to the substantial influx of inaccurate ERC claims. Presently, the IRS is concentrating efforts on ERC claims tied to businesses that experienced a partial suspension of operations due to a COVID-19 government order limiting commerce, travel, or group gatherings. The IRS has outlined five scenarios in a memorandum that disqualify an employer from ERC eligibility concerning a business suspension resulting from a government mandate affecting a supplier.

ERC Refund Update November 2023

The IRS has noted an increasing proportion of claims that do not meet eligibility criteria, attributing this trend to assertive and fraudulent promoters, thereby exposing businesses to financial jeopardy. Emphasizing the repercussions of improper ERC claims, the IRS highlighted the potential requirement for repayment, accompanied by possible penalties and interest.

While the IRS will persist in processing the over 600,000 pending claims received before the moratorium, this will occur at a slower pace due to more comprehensive compliance reviews. The standard processing timeframe for existing ERC claims is expected to extend from the usual 90 days to 180 days, and potentially even longer if a claim undergoes additional scrutiny or audit. Additionally, the IRS may request additional documentation from taxpayers to verify the legitimacy of specific claims. As of now, the IRS is actively handling numerous criminal cases related to ERC fraud and has forwarded thousands of ERC claims for audit.

We're here to assist you in navigating forward. If you have submitted or are contemplating an ERC claim and have concerns about the calculation or eligibility, our team is available to review your circumstances and assist in determining the appropriateness of an ERC refund claim.

If you have any doubts about your eligibility for the ERC tax credit, it's best to consult a ERC expert for proper guidance. Contact us today for your free ERC consultation!