IRS Cracks Down on Improper and Fraudulent ERC Claims and Promotion- September 21, 2023

Last week, IRS Commissioner Danny Werfel ordered an immediate moratorium – in effect through at least the end of this year – on processing any new claims for the Employee Retention Tax Credit program (“ERC”). The moratorium comes as a direct response to increasing concerns about a rising number of ineligible claims, as well as a continued increase in marketing and promotion by unscrupulous promotors that places small businesses at risk of scams.

Taxpayers who have filed claims can also expect an increase in the processing time of the claims, as the IRS will be scrutinizing all claims much more closely. Taxpayers can also expect an increase in audits of questionable claims and more criminal investigations as the IRS shifts its focus to ensuring compliance. ERC promoters and businesses “specializing” in ERC claims can expect increased scrutiny as well.

In recognition of the numerous businesses which filed claims based upon poor (or fraudulent) guidance and now want to correct the prior filings, the IRS has announced that it is developing new programs geared towards assisting businesses who may have been influenced by aggressive and dishonest promotion and marketing. For those claims that have already been processed, the IRS is creating a settlement program – to be initiated this fall – for voluntary disclosure and repayment by those who received an improper ERC payment. For claims filed, but not yet processed, the IRS announced that they are working on an option whereby those claims can be withdrawn before processing.

The IRS will be issuing additional information and guidance regarding these programs and initiatives in the coming weeks.

Additionally, the IRS continues to update its ERC Frequently Asked Questions, so as to assist taxpayers in determining their eligibility for the ERC.

As always, please do not hesitate to contact Neil or Lara with any of your questions. You can reach us by replying to this e-mail or calling our office at (631) 683-8700.