Delays and Diligence: Navigating the ERC Claims Amidst IRS Reviews and Fraud Concerns

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If you’ve submitted a claim for the Employee Retention Credit (“ERC”), anticipate a delay of six months or more before receiving any funds. Due to increasing worries over numerous inappropriate ERC submissions, the IRS has halted the acceptance of new claims until at least the close of 2023 for an in-depth examination. Here are the details on the expected timeline for your payment.

Understanding the Situation
The ERC was designed to aid businesses in retaining employees and minimizing layoffs amid the pandemic. It offers a substantial credit, with each employee credit potentially reaching $26,000. However, with the upcoming deadline for filing ERC claims for 2020 and 2021 set at April 15, 2024, and April 15, 2025, respectively, there’s a growing anxiety about potential fraudulent claims. The IRS has already flagged thousands for audits and identified numerous ongoing criminal cases.

Implications for Your Business

  1. If you have filed an ERC claim: Be prepared for a delay of up to 180 days or even longer, especially if you face an audit or are required to submit additional documents.
  2. If you are considering an ERC claim:  Be very careful who helps you file amended payroll tax filings to get the ERC. There are a number of promoters and operators that will get you the credit, take their fee, but leave you holding the risk of filing an improper claim. Read more in our ERC Fraud Alert.
  3. If you have not taken the credit: If your business qualifies, especially due to disruptions or mandated shutdowns between March 12, 2020, and January 1, 2022, consider applying. Just be aware that there will be a lengthy delay before you see any money. And, applying for and receiving the credit will require an amendment to the year’s tax return for which the credit was received.  In some cases, this could in turn also trigger amendments to personal returns.

The intricacies of the ERC, coupled with its precise eligibility criteria, can make it a challenging territory to navigate. While the situation remains fluid, it’s crucial to stay informed and make well-informed decisions.

Need Assistance or Have Questions?
As with all complex tax issues, we are here to help! This is a great program for small businesses, and we want to help our clients take advantage of it. Reach out to your Tax Advisor with any questions.

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