The IRS has observed increased questionable and potentially fraudulent submissions related to the Employee Retention Credit (ERC). Consequently, from September 14, they temporarily suspended the acceptance of new ERC applications. Additionally, they will be scrutinizing the existing 600,000+ claims more meticulously.
A Brief Overview of the ERC:
In 2020, Congress launched the ERC to support businesses during the COVID-19 pandemic. This provision allowed companies a payroll tax rebate for retaining their workforce.
For claims about 2020, businesses have until April 15, 2024, to file. For 2021 claims, the cutoff is April 15, 2025.
However, due to the IRS’s current halt on ERC submissions, those intending to file must postpone their applications until at least January 2024.
Reason for the Suspension?
Certain agencies have aggressively advocated for businesses to maximize their claim amounts, sometimes retaining up to 25% of the claim value as their commission. The IRS discovered that a vast majority of these submissions, nearly 95%, could be problematic or outright false.
Latest Announcements from the IRS:
- Settlement Program: Businesses that inadvertently obtained ERC funds will soon have an avenue to return these funds. More information will be provided in due course.
- Withdrawal Option: If your claim is pending and hasn’t been reviewed yet, you may have the opportunity to retract it. However, intentional deceit could result in legal consequences.
Guidance for Small Businesses:
- Pending Claims: The IRS will still process your application but anticipate delays due to heightened scrutiny.
- Are you considering a Claim? Ensure you’re fully acquainted with all the regulations. Beware of unfamiliar entities promising assistance; you want to avoid complications with the IRS.
- Uncertain about a Submitted Claim? Engage a tax specialist. It might be feasible to retract your submission if discrepancies are identified.
- Received Funds but Doubtful? The IRS will soon outline a procedure for businesses to immediately settle and return undue funds without added penalties.
Small businesses should tread carefully, particularly when liaising with unknown entities suggesting assistance with filings.
Engaging with a tax professional like Tavola Group is important for detailed guidance on your ERC claim or funds received. While the IRS is facilitating rectifications, accuracy from the outset is paramount. Stay updated and maintain utmost honesty in all transactions.