IRS Suspends Processing of New ERC Claims Due to Scams

The Employee Retention Credit (ERC) was created under the 2020 CARES Act to help small businesses keep employees on their payrolls during pandemic-related shutdowns. Unfortunately, the refundable credit has become a target of scammers, who aggressively market the program to ineligible taxpayers. To protect businesses from these predatory scams, the IRS has declared a moratorium on processing new ERC claims through at least December 31.

Instead of reviewing the complex ERC rules with taxpayers to determine whether they qualify for the credit, ERC scammers lure business owners into signing bogus applications. If the IRS issues a credit before detecting the fraud, the scammers collect high contingency fees from the business owners, who end up having to repay the credit with penalties. Many businesses have lost tens of thousands of dollars or more as a result of these schemes.

ERC-related scams are now the targets of hundreds of criminal investigations, with thousands of suspicious ERC applications flagged for audits. If you believe that your business may qualify for the ERC, you may still apply, but there is no rush due to the processing moratorium. Ignore aggressive advertising and hype, and take the time to seek advice from a trusted tax preparer.

Posted on October 1, 2023