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IRS Suspends the Processing of New Employee Retention Tax Credit Claims

26 Oct

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Update Applicable to:

All employers who claim ERTC

What happened?

The IRS has announced an immediate moratorium on processing new Employee Retention Tax Credit (ERTC or ERC) claims, which will last at least until the end of 2023. Additionally, the IRS issued a warning against “aggressive promoters,” known as ERTC mills, who mislead employers into making improper ERTC claims.

What are the details?

The IRS has temporarily halted the processing of new ERTC claims to address potential issues and improper claims. This suspension will remain in effect until at least the end of 2023. The IRS has reiterated its warning about aggressive promoters or ERTC mills that provide misleading information to employers, leading to improper ERTC claims.

Pat Cleary, President and CEO of the National Association of Professional Employer Organizations (NAPEO) expressed support for the IRS’s actions and its efforts to address the backlog of legitimate ERTC claims. Many small businesses have been waiting for months or even years to receive their rightful ERTC funds.

The IRS’s announcement provides clarity on the processing time for outstanding ERTC filings and acknowledges the delays in handling these claims.

  • The withdrawal process is available to taxpayers who filed an ERTC claim on an amended return (e.g., Form 941-X) and who have not yet received a refund (or have not cashed or deposited a refund check).
      
  • The withdrawal process is only available in cases where a taxpayer filed an amended return to claim the ERTC, made no other adjustments on the amended return, and wants to withdraw the entire amount of their ERTC claim. Taxpayers who are not eligible to use the withdrawal process can reduce or eliminate their ERTC claim by filing an amended return. 
  • Taxpayers Who Already Received an ERTC Refund: The IRS will provide additional guidance this fall to help employers that were misled into claiming the ERC and have already received the payment. 

Q: How do I withdraw my ERC claim if I used a certified professional organization (CPEO), professional employer organization (PEO), and other IRC section 3504 agents? (added October 19, 2023)

A: If you use a professional payroll company and they filed your ERC claim for you, you should consult with them if you want to withdraw your ERC claim. Depending on how the company filed your claim – individually or batched with others – you may need to have them submit your withdrawal request. 

The IRS also released a webpage describing the process in more detail, FAQs on the withdrawal process, and a fact sheet for your review. The IRS plans to hold a November 2 webinar on the ERTC claims moratorium and withdrawal process.  

For more information, please see the links below:

*Latest IRS Update: IR-2023-193, Oct. 19, 2023

IRS Announcement 1

IRS Announcement 2

Firm: Article 1, Article 2

What do employers need to do?

The IRS urges taxpayers to carefully review the ERTC guidelines during the moratorium period. Employers should consult a trusted tax professional for questions during this period and review the above links.

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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