Employee Retention Credit (ERC) Update: Everything You Need to Know About the ERC Moratorium

11/14/2023 - By Glenn Scharf, CPA, CVA

The Employee Retention Credit (ERC) was created to incentivize companies to maintain their payroll during the COVID-19 pandemic and consequential economic shutdown. However, due to numerous falsified claims, the Internal Revenue Service issued a moratorium on new ERC claims effective September 14, 2023 through December 31, 2023. Keep reading for recent ERC updates and how they could affect your business. 

Why Did the IRS Create a Moratorium? 

  • The increase in fraudulent claims from promoters of the ERC.
  • Claims were being filed without regard to the qualification criteria.
  • Claims filed had misinterpreted the qualification criteria (i.e. supply chain).

What Should You Expect During the Moratorium? 

  • During this period, no new claims will be processed, and claims filed before September 14, 2023, should expect extended processing times. As of right now, they are taking a minimum of 180 days to process.
  • You may still file a legitimate ERC claim during the moratorium, but it will not be processed during the moratorium. 

What Changes Have Been Made to the Withdrawal Process?

  • The IRS has implemented the ERC claim withdrawal process for claims that meet all the following 4 criteria:
    • You made the claim on an adjusted employment tax return (Forms 941-X).
    • You filed an adjusted return only to claim the ERC, and you made no other adjustments.
    • You want to withdraw the entire amount of your ERC claim.
    • The IRS has not paid your claim, or the IRS has paid your claim, but you haven’t cashed or deposited the refund check.
  • Each quarter is considered a separate claim, and these criteria apply to each quarter independently.
  • Withdrawals are effective upon receiving an acknowledgment letter from the IRS. Once received, and if you filed an amended income tax return to account for the ERC, you will be required to file an income tax return amendment to reverse that transaction.
  • If you have filed using a PEO, there will be further guidance coming soon.
  • If the claimant was notified that they are under audit, they can still submit a withdrawal. 

What Action Is Being Taken Against ERC Fraud?

  • The IRS has taken measures to address improper and fraudulent ERC claims. To combat ERC fraud the IRS will pursue criminal and civil penalties.
  • The IRS urges businesses to beware of third parties promoting improper claims of the ERC.
    • Examples of taxpayers who are not eligible to claim the ERC and are often targeted by ERC scam promoters include employers who experienced supply chain disruptions but did not experience a full or partial suspension of operations by a qualified order.
  • The IRS urges all taxpayers who have had claims calculated by a promoter to have their claim reviewed by a qualified CPA.

Questions?

If you have questions about the ERC moratorium and the withdrawal process or you would like your claim reviewed to ensure you meet the qualifications, please reach out to one of our ERC team members:

Glenn Scharf – (850) 855-4642 – glenn.scharf@saltmarshcpa.com

Jeanne Profita – (813) 222-3936‬ – jeanne.profita@saltmarshcpa.com 

About the Author | Glenn Scharf

Glenn is a shareholder at Saltmarsh, Cleaveland & Gund and leads the firm's Client Accounting & Advisory Services. Glenn leverages technology and modern accounting processes to help his clients improve data quality and access meaningful analytics to improve financial performance. He and his accounting team are equipped to assist clients with management of their back-office accounting needs, including full outsourcing, automating internal accounting and CFO services. 

 

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