The IRS has announced that it is no longer processing newly filed Employee Retention Credit (ERC) claims, as of Sept. 14 and through at least Dec. 31, in order to develop new initiatives to address fraudulent claims.

The ERC is a payroll-tax-based, fully refundable federal tax credit designed by Congress to incentivize employers to retain and continue to pay wages to their employees during the COVID-19 pandemic. The IRS, which oversees the ERC process, has been issuing communications for months regarding its concern that many fraudulent ERC claims may have been filed, in particular with the assistance of overly aggressive promoters.

The IRS disclosed that it is finalizing a “special withdrawal option” to permit taxpayers who have claimed ERCs that have not yet been processed or paid to withdraw their claims if they believe they were submitted impermissibly.

In addition, the IRS advised that employers that are considering filing ERC claims should do so only after carefully reviewing the ERC eligibility requirements, and with the assistance of a trusted tax professional because of their complexity.

Another announced initiative is that the IRS may request additional documentation from a claiming employer as part of its regular claims process procedure. The IRS will continue to process pre-Sept. 14 ERC claims submissions, but advised that its standard processing goal would be increased from 90 to 180 days, to permit it to focus on its anti-fraud initiatives.

What does CohnReznick think?

We have worked with many employers who were given extremely aggressive (if not erroneous) advice by consultants, where we helped to revisit the consultants’ conclusions and properly document ERCs as required by applicable law. If an employer claimed ERCs and now is having second thoughts as to their ERC eligibility, we would be happy to assist them. We will continue to monitor for details from the IRS regarding the special withdrawal option.

Contact

Dana S. Fried, JD, LLM, Managing Director – National Tax Services

516.417.5064

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