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Crucial IRS Update: Moratorium on Employee Retention Credit Claims and Tips to Avoid Scams

October 06, 20232 min read

Amid a changing economic landscape, punctuated by the challenges of the COVID-19 pandemic, the Internal Revenue Service (IRS) made a critical announcement: a temporary halt, starting September 14, 2023, on the processing of new Employee Retention Credit (ERC) claims. This decision is not just about paperwork and processing—it's an indicator of deeper, underlying issues in the tax world, ones that every business owner should be aware of.

A Look Back: The Birth and Evolution of the ERC

The ERC was designed as a financial respite for businesses struggling in the aftermath of government-enforced COVID-19 restrictions. Emerging from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the credit originally covered 50% of qualified 2020 wages. As the pandemic continued to shape the economy, the ERC underwent crucial amendments. The American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act brought further changes, modifying the ERC benefits structure.

The Current Scenario: Key Updates and Implications

  1. Moratorium's Time Frame: Slated to last until at least December 31, 2023, this freeze is the IRS's strategy to meticulously review and ensure the legitimacy of claims.

  2. Defense Mechanisms: In response to an upswing in dubious claims, the IRS is actively fortifying its protective barriers against fraudulent filings.

  3. Potential Delays: While precision is of the essence, it may come at the cost of time. Businesses should brace for ERC processing times that could span well beyond the typical period, possibly extending over 180 days.

Red Flags and Remedies: Steering Clear of ERC Scams

With every financial initiative comes the shadow of opportunists. IRS Commissioner Danny Werfel warns businesses of the growing menace of scam promoters. Some cautionary indicators include:

  • Unsolicited communications pushing ERC claims.

  • Dubious guarantees of eligibility without adequate analysis.

  • Sky-high initial fees or charges contingent on potential refunds.

Werfel's advice is crystal clear: businesses should opt for seasoned tax professionals who possess a genuine understanding of ERC intricacies over fast-talking promoters eyeing a quick profit.

To support businesses ensnared by these scam artists, the IRS is rolling out supportive measures. These include a settlement program for repayment and an option to withdraw yet-to-be-assessed ERC claims—though it's essential to note that willful fraudulent withdrawals may still face legal action.

Futureproofing Your Business: Staying Informed and Vigilant

In a dynamic financial ecosystem, staying updated is not just advisable—it's imperative. As regulations evolve and challenges arise, the key is to be proactive. Understand the nuances of programs like the ERC, be cautious of too-good-to-be-true offers, and always prioritize the long-term well-being of your business.

If there's any uncertainty, or if you've encountered dubious ERC promoters, the Jones Law Firm is at your service. We offer a FREE survey to access your potential claim to guide you through the intricate maze of tax regulations and ensure your business's safety.

ERTCEmployee retention tax creditsERCirs
The Jones Law Firm, PC. is a law firm that primarily focuses on various mass-tort cases and personal injury. Chad Jones is the founder.

Chad Jones

The Jones Law Firm, PC. is a law firm that primarily focuses on various mass-tort cases and personal injury. Chad Jones is the founder.

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