Banking and Business Monthly – September 2023

As a result of a flood of improper claims for the Employee Retention Credit (ERC), on September 14, 2023, the IRS announced an immediate moratorium on processing new ERC claims through at least the end of 2023. According to the IRS, the moratorium was issued to protect honest small business owners from being scammed by unscrupulous promoters who submit questionable claims on their behalf.

The ERC is found in Internal Revenue Code Section 3134 and was part of the CARES Act. It is a refundable employment tax credit for qualified wages paid by certain employers. To receive the credit, businesses need to meet specific requirements, such as a complete or partial suspension of operations due to a government shutdown order, a significant decline in gross receipts, or qualification as a “recovery startup business” – each as determined under applicable Department of the Treasury regulations and IRS administrative guidance. The ERC is 50% for wages paid between March 13, 2020 and December 31, 2020 (with a maximum credit of $5,000 per employee for all of 2020) and a 70% credit for wages paid in the first, second, and third quarters of 2021 (with a maximum credit of $7,000 per quarter).

While ERC claims received after September 13, 2023 will not be processed until the moratorium ends, the IRS will continue to process ERC claims received before that date, but they will receive additional scrutiny before being approved. That additional scrutiny will extend the IRS’s standard processing goal from 90 days to 180 days.

The IRS encourages businesses to review IRS guidance and tools for helping determine ERC eligibility, including frequently asked questions and a question-and-answer guide, to help businesses understand if they are actually eligible for the credit. The IRS also recommends that businesses consult with trusted tax professionals and not promoters or marketers looking to get a large contingency fee.

For further inquiries or questions regarding this topic, please contact me at smigala@lavellelaw.com or (847) 705-7555.