The final execution date has been set for filing ERC claims and amended returns. Amidst a huge backlash of false claims, corrupt pop-up credit pushing companies, and a bogged down Internal Revenue Service (IRS) processing system, the IRS has put a halt to processing new claims.
The moratorium began Sept. 14 and will run through at least Dec. 31.
The employee retention credit has been the source of much criticism since its pandemic roll out. The original design was meant to aid and support employers who did not layoff and otherwise reduce their staff size during the pandemic, in spite of government ordered shutdowns and declines in sales.
What actually happened was a huge outburst of “ERC specialty” firms that claimed to be able to aid their clients in getting huge dollars back. The actual credibility of most of the claims however, were questionable at best.
Most of the “specialty” providers were convincing clients they qualified for all kinds of bogus reasons, knowing that the oversight of the credits was minimal in the face of a short staffed IRS. CPAs nationwide, as well as the American Institute of Certified Public Accountants (AICPA) pushed for more oversight and a crackdown on these pop-up shops pushing credits where credits didn’t belong.
Clients were receiving phone calls and emails constantly trying to convince them that they may be eligible for huge dollar refunds. The marketing was relentless and many tax practitioners found themselves fielding a constant inquiry from clients asking whether or not they qualified or should be looking into working with these pop-up shops.
The situation was incredibly frustrating for practitioners trying to continually explain to clients why they didn’t qualify but were still receiving phone calls saying that they did.
The IRS will stop receiving ERC claims after April 15, 2024, for 2020 related claims and April 25, 2025 will be the last date to file amended returns for 2021 claims. In the meantime however, the IRS will not process any claims received between Sept. 14 of this year and through Dec. 31.
These claims may continue to be processed after the moratorium ends in December, but the potential for long delays for legitimate claims is now a reality. Small business owners who legitimately deserve to have these funds put back into their business will have to wait longer due to the claim halt.