September 15, 2023 On Thursday, September 14, 2023, the Internal Revenue Service issued IR-2023-169, announcing an immediate moratorium on the processing of claims for Employee Retention Credit (ERC). The IRS has previously cautioned businesses against companies that have been aggressively marketing claims of ERC eligibility. Now, amid concerns of proliferating improper submissions, the IRS issued an Employee Retention Credit moratorium announcing they will not process new claims for ERC until at least January 1, 2024. Table of Contents Qualification Criteria and Recent Guidance To qualify for ERC, a business must have sustained either a “significant decline in gross receipts” or a “full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel or group meetings because of COVID-19” during 2020 or the first three quarters of 2021. The latter method requires extensive documentation of the specific government orders giving rise to the purported suspension of operations and the impact on one’s business. Since the inception of ERC as part of the CARES Act in March 2020, the IRS has issued substantial authoritative documentation explaining how to apply the rules surrounding government restrictions, including Notices 2021-20, 2021-23, and 2021-49. On July 21, 2023, the IRS Office of Chief Counsel issued Memorandum AM 2023-005, providing examples of how businesses can properly apply the above rules, citing specific language from the CARES Act, related guidance and the Internal Revenue Code regarding “suspension of operations” and “supply chain disruption”, two areas that are being exploited by these aggressive marketers. Understanding the IRS’s Fraud Prevention Measures for ERC “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in,” IRS Commissioner Danny Werfel explained, adding, “The moratorium will help protect taxpayers by adding a new safety net onto this program to focus on fraudulent claims and scammers taking advantage of honest taxpayers.” IRS is currently developing fraud prevention measures for ERC, including a settlement program for repayments of improper ERC refunds as well as a special withdrawal option for businesses to revoke dubious claims that have not yet been processed. In addition, they are working with the Justice Department to address not only rampant fraud in the ERC program, but also promoters who have been encouraging businesses that don’t meet the proper criteria to apply for the credit. In the meantime, IRS will continue to process previously filed ERC claims during the Employee Retention Credit moratorium period, but at a slower pace. Stricter compliance rules are being implemented, increasing the standard processing goal from 90 days to 180 days, and the IRS may request additional documentation during processing to support the legitimacy of claims. IRS has also issued a new question and answer guide to help businesses navigate the criteria for ERC eligibility and determine if they legitimately qualify for the credit. How KatzAbosch Can Help Benefit from KatzAbosch’s industry-leading tax incentives and credits expertise in ERC eligibility, a credit we’ve excelled in since its inception in 2020. Our unwavering commitment to professional excellence sets us apart from IRS-targeted fraudsters. With our assistance, clients have successfully claimed tens of millions of dollars in ERC refunds. Our ERC professionals stay up to date with the latest guidance to secure the best long-term benefits for your business. Ready to optimize your tax and business strategy? Reach out to your KatzAbosch representative or contact us today to get started. Frequently Asked Questions (FAQ) about the IRS Employee Retention Credit (ERC) Announcement 2023 What is the IRS ERC Announcement 2023 about? The IRS ERC Announcement 2023 pertains to a moratorium on the processing of claims for Employee Retention Credit (ERC) due to concerns about fraudulent claims. When was the IRS ERC Announcement 2023 issued? The announcement was issued on Thursday, September 14, 2023. What is the purpose of the moratorium on ERC claims? The moratorium aims to address concerns about the proliferation of improper ERC submissions and protect taxpayers from unscrupulous actors taking advantage of the program. How long will the ERC moratorium be in effect? The moratorium on processing new ERC claims will be in effect until at least January 1, 2024. What are the qualification criteria for ERC? To qualify for ERC, a business must have sustained either a “significant decline in gross receipts” or a “full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings because of COVID-19” during 2020 or the first three quarters of 2021. What documentation is required for ERC claims based on a suspension of operations? Businesses claiming ERC based on a suspension of operations must provide extensive documentation of the specific government orders leading to the suspension and the impact on their business. Are there any resources available to help businesses understand ERC eligibility? Yes, the IRS has issued guidance documents, including Notices 2021-20, 2021-23, and 2021-49, to explain how to apply the rules surrounding government restrictions and ERC eligibility. How is the IRS addressing fraudulent claims during the moratorium? The IRS is actively working on a settlement program for repayments of improper ERC refunds and a special withdrawal option for businesses to revoke dubious claims. They are also collaborating with the Justice Department to combat fraud and unscrupulous promoters. Will previously filed ERC claims be processed during the moratorium? Yes, previously filed ERC claims will continue to be processed during the moratorium period, albeit at a slower pace. Stricter compliance rules are being implemented, and additional documentation may be requested to verify the legitimacy of claims. Where can I find more information and guidance on ERC eligibility? The IRS has issued a new question and answer guide to help businesses navigate the criteria for ERC eligibility and determine if they legitimately qualify for the credit.
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