Hey everyone, I’m Bette Hochberger, CPA, CGMA. Navigating the nuances of tax credits can be challenging, especially when it involves incentives like Employee Retention Credits (ERC). Here’s an easy-to-understand guide to ERCs, highlighting recent changes and important precautions.

What Are Employee Retention Credits (ERC)?

Employee Retention Credits are a payroll tax credit designed to encourage businesses to keep employees on their payroll during economic downturns. These credits reduce the amount of federal employment taxes, including specific health insurance costs.

Key Changes in 2023

IRS Moratorium on New Claims

As of September 14, 2023, the Internal Revenue Service (IRS) has implemented significant changes regarding the ERC:

  1. Moratorium on Processing New Claims: Due to an increase in questionable claim submissions, there’s a hold on processing new ERC claims, intended to last until at least December 31, 2023.
  2. Review of Existing Claim: Claims already submitted will be processed, albeit at a slower pace due to detailed compliance reviews. This is to ensure accuracy and prevent fraud.
  3. Increased Vigilance: The IRS warns against using services that aggressively market and promote ineligible ERC claims, part of the reason behind the stricter reviews and moratorium.

Processing Delays

Businesses should be prepared for extended processing times. Due to the tighter compliance reviews during the moratorium, existing ERC claims may now take 180 days or longer to process.

Beware of ERC Scams

The IRS has noted an uptick in ERC-related scams. Often, these involve third parties pushing ineligible businesses to apply for ERC, sometimes with inflated promises and large fees.

Tips to Avoid Scams

  1. Verify Eligibility: Cross-check your eligibility against IRS guidelines.
  2. Consult a Trusted Tax Professional: For safe application, seek advice from knowledgeable tax experts.
  3. Be Skeptical of Over-Promises: Avoid entities guaranteeing specific credit amounts or suggesting dishonest claims.

ERCs provide valuable financial relief for eligible businesses. With the recent moratorium and changes in regulations, it’s more crucial than ever to remain informed and exercise due diligence. 

Seek professional advice to navigate these changes, ensuring legal compliance and maximizing available credits. Stay updated, stay compliant, and harness these credits effectively for your business.

I hope you learned something new today. As always, stay safe, and I will see you next time.