The IRS Employee Retention Credit (ERC) has been a crucial lifeline for many businesses grappling with the economic challenges triggered by the COVID-19 pandemic. As of my last knowledge update in September 2021, the IRS had introduced a moratorium on this vital financial relief program, citing concerns about eligibility and backlog. In this article, we will delve into the reasons behind the ERC moratorium, how it affects businesses, and the steps being taken to enhance the program’s efficiency.
Why the ERC Moratorium?
The IRS implemented the ERC moratorium due to several key factors:
- Backlog: One of the primary reasons for the moratorium was a substantial backlog of over 600,000 ERC claims. The pause in the program enables the IRS to clear this backlog efficiently.
- Eligibility Concerns: The IRS expressed growing concerns that a significant portion of the new ERC claims were from ineligible businesses, potentially putting them at financial risk. The moratorium provides an opportunity to scrutinize claims more thoroughly and ensure that only eligible businesses receive the credit.
- Safeguarding the Process: The IRS aims to establish new procedures that bolster their review process, effectively preventing ineligible companies from accessing the This step is crucial in maintaining the integrity of the program.
How CHS Payroll is Responding
In light of the ERC moratorium, CHS Payroll has adapted its operations to serve existing clients and retrieve new clients. Our paid lead-generation advertising and new business development activities have been ramped up to help us do so. Additionally, we have chosen to delay moving current customers from the eligibility assessment phase to the tax preparation phase, given the potential for changing guidelines when the moratorium is lifted.
For tax returns already in the post-tax preparation phase, our independent tax professionals will carefully review them before submission to the IRS, ensuring that our clients receive the best service possible while complying with evolving IRS regulations. We remain committed to transparent communication and support for our customers throughout this waiting period.
Potential Impact of a Government Shutdown
It’s worth noting that the IRS’s recent operational changes due to the moratorium could have direct consequences on ERC claims in the event of a government shutdown. With potential furloughs and a partial closure, the processing of ERC claims could be significantly delayed, causing hardships for businesses already in need of financial support. Therefore, it is crucial for ERC-reliant businesses to closely monitor this situation and prepare for potential delays in receiving their credits.
Next Steps for Employers
The IRS has also introduced an amnesty program for employers who have filed but wish to withdraw their ERC claims. Depending on their current status in the process, employers have different options:
- Employers Awaiting Processing: The IRS is developing a method for employers to retract their ERC claims if they no longer However, this may lead to delays in processing the amended return.
- Employers Yet to File: Employers who haven’t yet filed an ERC claim have the option to file an amended However, processing of these returns will not begin until early 2024 at the earliest.
- Employers Who Received Payment but Are Now Ineligible: The IRS is working on an ERC settlement program for the repayment of the credit.
- Reporting Scams: Employers who suspect they are victims of ERC-related scams should promptly report any illicit tax-related activities to the IRS.
In Conclusion
The ERC moratorium, as of my last knowledge update in September 2023, is a significant development affecting businesses that rely on this financial relief program. It is essential for businesses to stay informed about the latest IRS guidelines and consult with professionals to navigate this challenging period. While facing uncertainty, businesses can adapt and explore alternative relief programs or strategies to secure their financial well-being. The evolving nature of economic relief programs underscores the need to stay vigilant and adaptable during times of uncertainty.
At CHS Payroll, we remain dedicated to serving eligible small businesses during these uncertain times, standing alongside them as they navigate the changing landscape of economic relief programs. We are committed to empowering small businesses to thrive and succeed, no matter the challenges they face. Together, we will find our way through these uncertain times toward a brighter, more promising future for small business owners across the nation.