Josh Mullins - The Journal Record
Nov 22, 2023
As we approach the end of the year, the employee retention credit is still on the minds of many business owners as ERC promoters are still actively pursuing, through email, text, media and phone calls, the promotion of these credits.
As we approach the end of the year, the employee retention credit is still on the minds of many business owners as ERC promoters are still actively pursuing, through email, text, media and phone calls, the promotion of these credits.
Unfortunately, something that was meant to help business owners who were struggling during the COVID pandemic to keep people employed has become one of the worst areas of tax fraud the IRS is battling today. On Sept. 14, 2023, the IRS published a notification of immediate moratorium on processing any new claims for the remainder of the 2023 calendar year.
Per this moratorium, the IRS stated “The IRS emphasizes that payouts for these claims will continue during the moratorium period but at a slower pace due to the detailed compliance reviews. With the stricter compliance reviews in place 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.”
The IRS not only put the moratorium in place but also published a process to withdraw a claim if you are concerned your claim might be fraudulent. The IRS suggests that if you used an ERC marketer, you need to understand if your claim qualified or not and consider if you should participate in the withdrawal program.
While the program is under moratorium to process new claims, there are still considerations to be made. First, you can determine if you qualify or not and begin the process of filing a claim once the moratorium is over. The rules about qualifying for the ERC are complicated and changed throughout the pandemic.
Second, consider if you should withdraw your claim. Since qualifying for the ERC already has been discussed at length, let’s go through some of the requirements for withdrawing a claim. If you have already filed a claim either on an originally filed payroll form or an amended payroll form and you received the credit and deposited the funds, you don’t qualify for the withdrawal program.
Also, if you have already received a notice from the IRS disallowing your entire ERC claim, you are unable to use the withdrawal program. Per the IRS, in order to qualify for the ERC withdrawal process, employers must meet all the following requirements:
• They made the claim on an adjusted employment tax return.
• They filed the adjusted return only to claim the ERC, and they made no other adjustments.
• They want to withdraw the entire amount of their ERC claim.
• The IRS has not paid their claim, or the IRS has paid the claim, but they haven’t cashed or deposited the refund check.
The level of fraud in this program has pushed the IRS to scrutinize claims made to identify those that don’t qualify under the legislation that created this program. The unintended consequences created for taxpayers who participated in this program are complicated and could result in unexpected results for years to come.
Josh Mullins, CPA, is a partner at Arledge, the largest locally owned accounting firm in the Oklahoma City metropolitan area. Arledge is a recognized leader in the accounting industry, offering practical solutions in the areas of tax planning, auditing, consulting, accounting advisory services and client accounting.