IRS Freezes New ERC Claims to Safeguard Against “Fraud and Revenue Loss”

The Employee Retention Credit (ERC) was an economic relief program made available to businesses impacted by the COVID-19 pandemic, and until recently, affected businesses could claim the credit retroactively. However, the Internal Revenue Service (IRS) has now placed a moratorium on new ERC claims as it investigates widespread fraud under the program. Virginia federal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains.

IRS Places Moratorium on New ERC Filings as It Investigates Widespread Tax Fraud

On September 14, 2023, the IRS announced that it would stop processing new ERC claims “through at least the end of the year.” The moratorium comes as the IRS continues to raise concerns about aggressive promoters and other scam artists targeting business owners by offering to help them file fraudulent claims for a fee. While the IRS notes that it intends to offer options to business owners who fell victim to ERC promotion scams, it also makes clear that taxpayers ultimately remain responsible for the contents of their filings.

While the moratorium is in place, the IRS will continue to process ERC claims previously filed. However, it notes that “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 and its Criminal Investigation Division (IRS CI) will also continue to target businesses (and business owners) suspected of submitting fraudulent claims.

What Business Owners in Virginia Need to Know

As a business owner in Virginia, what does this mean for you? The answer depends on whether you have filed for the ERC (or hired a third-party service provider to file on your business’s behalf):  

• If You Haven’t Filed for the ERC – If your business is eligible for the ERC, but you haven’t yet filed a claim, you will not be able to file a claim until the IRS lifts its moratorium.
• If You Filed for the ERC Before September 14 – If you filed for the ERC before September 14, the IRS will still process it, but you should expect a significant delay. You should also expect to face intensive scrutiny when the IRS gets around to reviewing your filing.
• If Your Business Received the ERC – If your business has already received the ERC, you will want to ensure that your business was eligible. If it wasn’t, you could be at risk, and you will want to discuss your options with experienced tax counsel promptly.

Businesses (and business owners) that improperly claimed the ERC can face steep penalties. For those who have submitted fraudulent claims, avoiding unnecessary consequences requires a proactive approach. While voluntary disclosure and other options may be available, these options go off the table once the IRS initiates an audit or investigation.

Request a Confidential Consultation with Virginia Federal Tax Lawyer Kevin E. Thorn

If you have questions or concerns about facing federal scrutiny related to your business’s Employee Retention Credit, we encourage you to contact us for more information. To request a confidential consultation with Virginia federal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or tell us how we can reach you online today.