IRS Temporarily Suspends ERC Claims: What You Need to Know
September 20, 2023
On September 14, 2023, the Internal Revenue Service (IRS) announced an immediate moratorium on the processing of new Employee Retention Credit (ERC) claims until at least 2024. This pause in processing claims should not deter any employer from determining if it qualifies as an employer eligible to claim the ERC, documenting its eligibility, calculating the credit or filing an amended Form 940X to claim the appropriate credit. While new ERC claims will not be processed for the rest of 2023, they will be in line for processing when the IRS resumes its work in early 2024.
As a reminder, the final deadline for filing an ERC refund claim for 2020 is April 15, 2024, and the final deadline for filing an ERC claim for 2021 is April 15, 2025. Filings should be made well ahead of these filing deadlines to allow time to confirm that the claims are received by the IRS.
Why the Temporary Halt?
The IRS has implemented this temporary halt to processing new ERC claims because of the high volume of erroneous ERC claims received. The IRS is currently focusing attention on ERC claims which are based on the criteria for a business that experienced a partial suspension of operations caused by a COVID-19 government order limiting commerce, travel, or group meetings. With respect to whether an employer experienced a partial suspension of its business as a result of a government mandate affecting a supplier. The IRS has released a memorandum describing five situations which do not qualify the employer for ERC.
When reviewing ERC claims, Cherry Bekaert’s ERC team has observed errors such as a lack of documentation of how a government order caused a shutdown or partial suspension of more than a nominal portion of a business. Relying on government mandates that affected a supplier requires documentation of the supplier’s impact on an employer’s business operations. It also necessitates an examination of factors such as the employer’s inability to substitute products or reduce inventory levels.
The IRS announcement of the moratorium on processing new ERC claims provided more ERC guidance on the following items:
- A discussion of warning signs of aggressive promotion that can mislead people into making improper ERC claims
- An ERC eligibility checklist tool
- A discussion of how to withdraw an ERC claim if it has not yet been processed
- News that the IRS is working on a settlement initiative for employers concerned about the ERC refund they received that they would like to repay it
See IRS news release for full details.
Cherry Bekaert Is Here to Guide You Forward
If you have filed or are considering filing an ERC claim and are now concerned about the calculation or eligibility, the Cherry Bekaert ERC team is readily available to review your facts and help you determine whether a claim for ERC benefits is appropriate.
Related Guidance:
IRS Update on ERC Eligibility: 5 Scenarios That Do Not Qualify as Supply Chain Disruptions
ERC Audits: How to Prepare
September ERC Update: How to Avoid Employee Retention Credit Scams