Source: RSM US LLP. PBMares is a member of RSM US Alliance.
ARTICLE | September 15, 2023
Executive summary: ERC moratorium
On Sept. 14, the IRS announced it will stop processing any new employee retention credit (ERC) claims filed until at least the end of 2023.
Numerous businesses have either:
- filed and received refunds,
- filed but not yet had their claims processed, or
- begun the process of calculating credits with the anticipation of filing before the statute of limitations ends allowing the ERC to be claimed for 2020 or 2021.
Depending upon which of these scenarios an entity may be in, the announcement will have various implications as laid out in the release.
IRS halts employee retention credit processing
Additional IRS guidance
This action follows prior announcements where the IRS has indicated it was aware of significant fraud risk in the ERC market with numerous promoters helping businesses who may not be eligible file for large credits and earning a contingent fee on the credit amounts. The IRS also announced that hundreds of criminal cases are being worked on with respect to ERC filings, and thousands of ERC claims have been referred for audit.
In addition to summarizing the implications for entities in various scenarios, the IRS sent a letter to Congress asking for help combatting such fraud in the future, as well as publishing yet another release with red flags that may indicate aggressive promoters, an updated eligibility summary and new question and answer guide. It is important to note that none of this information provides new rules for applying the ERC, rather it provides a summary and reminders of previous guidance already issued by the IRS that the IRS believes many filers have not heeded.
Throughout the materials released, the IRS encourages employers to use trusted tax professionals for ERC guidance. Many entities will find themselves in a position of needing to reach out to a tax advisor with ERC experience to help determine their best path forward. In many cases, that path will not be clear until the IRS releases additional guidance for entities who have already filed an ERC claim who want to either:
- pay it back or,
- withdraw an unprocessed claim before the IRS reviews it.
Many entities are eligible for the ERC that have not yet filed a claim, and the statute of limitations is still open until April 15, 2024, for 2020 credits and April 15, 2025, for 2021 credits. These entities may find the IRS announcement discouraging as not all claims being filed now are fraudulent, rather many entities simply did not know until recently they were eligible or have not had the capacity to pull together the information to file the claims yet. The current announcement indicates the moratorium is only temporary so we would expect entities in this situation to still be able to file claims as the release does not state that you cannot file, but only that the IRS will not process them until further notice. We recommend you work with a tax professional to determine the best path forward in this situation.
This article will be updated as future guidance is available.
This article was written by Anne Bushman, Marissa Lenius and originally appeared on 2023-09-15.
2022 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.