Company News

ERC Fraud – IRC halts ERC Processing

September 16, 2023

According to Michael Cohn in Accounting Today – The IRS said Thursday that it’s putting an immediate stop to processing of new claims for the Employee Retention Credit (ERC) after receiving a surge of questionable claims.

The immediate moratorium will be in effect until the end of the year. For some time now, the ERC has been aggressively promoted by so called ERC mills who churn out bogus claims substantially claiming that all business qualify and urge you to seek the credit even if your CPA has advised you that you are not eligible for the credit.

The IRS said that even if you have already filed for the ERC that increased fraud concerns will mean processing times will take longer. In July, the IRS announced it was shifting more of its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS said Thursday that hundreds of criminal cases are now being worked by its agents, and thousands of ERC claims have been referred for audit.

As part of a wider compliance effort, the IRS is working with the Justice Department to focus on addressing fraud in the ERC program, as well as going after promoters who have been ignoring the rules and pushing businesses and organizations to apply for the credits whether or not they qualify. The IRS is also auditing the claims and has already referred thousands of ERC claims for further examination. Businesses should seek out a trusted tax professional who actually understands the complex ERC rules, not a promoter or a marketer hustling to get a hefty fee.

The IRS noted that contrary to advice given by unscrupulous preparers, IRS legal guidance in July makes clear that supply chain disruptions do not qualify an employer for the credit unless they are due to a government order.