September 15, 2023 | Posted in:

IRS Suspends Processing of Employee Retention Credits

Update as of October 2023:

With the recent rise of Employee Retention Credit scams and schemes, the IRS has announced a new withdrawal process for Employee Retention Credit claims. This new initiative aims to help businesses that are concerned about ineligible claims. The new withdrawal options allows for certain employers who have not yet received a refund to withdraw their submission of the ERC claim if they have any questions or concerns regarding the validity of the application. Visit the IRS website to learn more about this update.

We have all been inundated by ads from Employee Retention Credit (ERC) mills that claim virtually all businesses are eligible for the employee retention credit.  The truth, however, is that there are very specific circumstances that make a business eligible.  These include a significant decrease in revenue during the measurement period or a mandated government shutdown during COVID.  The unscrupulous ERC mills often promote claiming a supply chain interruption as a reason to qualify for ERC.

IRS Suspends ERC Processing for Remainder of 2023

IRS suspends ERC processing until December 31, 2023The IRS has had enough of this.  Because of the aggressive marketing to ineligible applicants, there are so many questionable claims coming in that the IRS is suspending the processing of all new ERC claims through at least December 31, 2023.  Claims filed prior to the moratorium will continue to be processed.

The IRS has already referred thousands of ERC claims for audit, and hundreds of criminal cases are being worked.  IRS Commissioner Danny Werfel said, “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in.”  He also urges businesses to “seek out a trusted tax professional who actually understands the complex ERC rules, not a promoter or marketer hustling to get a hefty contingency fee.”

Sufficient Documentation vs. Fraudulent ERC Claims

Businesses that already received ERC funds but are later found to be ineligible will be liable for repaying the credit with penalty and interest.  Defending a claim would not be a problem if there is sufficient documentation showing how the claims follow the rules.  It is doubtful, however, that all the pop-up ERC mills documented the claims properly.  It is also doubtful that all of them will still be around to help a business trying to defend an ERC claim.

The IRS is working on details for a withdrawal option for those who have filed a claim that has not yet been processed.  This would allow any of the approximately 600,000 claims awaiting processing to be withdrawn.  Meant to protect the honest business owner who was misled by a promoter, the withdrawal process will not protect those who willfully filed fraudulent claims.  Even if withdrawn, a willful filing or conspiring to file a fraudulent claim could be subject to criminal investigation and prosecution.

And as for that supply chain interruption excuse, the IRS says that “a business with those issued will very rarely meet the eligibility criteria.”

What this Means for Your Business Going Forward

For a little bit of background, the ERC is a relief measure created to help businesses keep employees on payroll and prevent layoffs during the COVID pandemic. Each employee credit can be worth up to $26,000. The deadline to file an ERC claim for 2020 and 2021 is April 15, 2024, and April 15, 2025, respectively. Following is how the latest IRS update may impact your business.

  • If you have filed an ERC claim: It could take up to 180 days for you to see your money due to stricter compliance reviews. If your claim is audited or you’re asked to provide additional documentation, your wait could be much longer than 180 days.
  • If you are considering an ERC claim: Be very careful who helps you file amended payroll tax filings to get the ERC. There are a number of promoters and operators that will get you the credit, take their fee, but leave you holding the risk of filing an improper claim.
  • If you have not taken the credit: If your business is entitled to the credit, you should conduct a review and take the ERC. This is especially true if you had a business disruption or a government-mandated shutdown and you have taken no other government help during the pandemic between March 12, 2020 and January 1, 2022. Just be aware that there will be a lengthy delay before you see any money.

Employee Retention Credit 2023 Update for Businesses


If you have questions or concerns on the Employee Retention Tax Credit, get in touch with an Alloy Silverstein Accountant and Advisor today.


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Julie Strohlein CPA

Associate Partner
Julie has over 20 years of experience in public and private accounting, representing varied clientele including the medical, legal, and real estate industries and trusts.
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