In September 2023 the IRS placed all Employee Retention Tax Credit (ERTC) claims in a moratorium. The agency is now restarting processing claims, but only those identified as low risk, and announced that it is denying “tens of thousands of improper high-risk” claims.
The moratorium was enacted because of the volume of claims submitted by dishonest third parties on behalf of honest business owners. These bad actors were often collecting upfront fees or asking for a percentage of refunds.
Since September, the IRS has assessed more than 1 million claims representing more than $86 billion and identified that between 10% and 20% of claims fall into what the agency has determined to be the highest-risk group. These claims will be denied.
For those claims with no eligibility warning signs that were received prior to last fall’s moratorium, the IRS will begin processing these claims and anticipates some of the first payments in this group will go out later this summer.
Claim withdrawal program available for businesses
The IRS continues to urge those with unprocessed claims to consider the special IRS ERC Withdrawal Program to avoid future compliance issues.
Businesses should quickly pursue the claim withdrawal process to ask the IRS to not process a claim for any tax period that hasn’t been paid yet. Taxpayers who received an ERC check, but haven’t cashed or deposited it, can also use this process to withdraw the claim and return the check. The IRS will treat the claim as though the taxpayer never filed it and no interest or penalties will apply.
Learn more about the withdrawal program in this blog post on our website.
We always monitor issues that affect our clients and will discuss those we believe may have an impact on your business.
Our tax professionals are to help.
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