Employee Retention Credit Update

On September 14th, 2023, the IRS announced a moratorium until at least the end of the year on the acceptance of new ERC claims. This moratorium was implemented due to the number of fraudulent claims being filed across the nation. In total, the IRS has received 3 million ERC claims, and nearly a fifth of all applications received were submitted in the 90 days before the declaration of the moratorium, indicating a large spike in fraudulent filings. Many businesses have been encouraged to apply by

“Tax Promoters.” “Tax Promoters” encourage and pressure businesses across the nation to file, often improperly indicating that businesses are eligible to receive a refund. With this in mind, the IRS has implemented a withdrawal process for those who filed for the credit in err. Please see below for more information: 
What filers and prospective filers can expect going forward:
- Claims that were filed before the September 14th moratorium will continued to be processed at a reduced speed, giving room for enhanced compliance review
- Claims submitted after the Sept. 14th moratorium will not be processed. If you have not filed and are interested in doing so, carefully review ERC eligibility guidelines (link to eligibility list at bottom of letter)
- Businesses that have filed and are not eligible will have to pay back the amount received plus penalties.
- Businesses that believe they have filed in error can withdraw their application.
Withdrawal Process
Those who have filed prior to the moratorium and have a pending claim should check the checklist and speak to their tax professional about their eligibility for the claim.
- If you believe your claim was submitted incorrectly, you can file a withdrawal if it has not yet been processed.
You can use the ERC claim withdrawal process if all the following apply:
- You made the claim on an adjusted employment tax return (forms 941-X, 943-X, 944-X, CT-1X),
- You filed your adjusted return only to claim the ERC, you made no other adjustments,
- You want to withdraw the entire amount of your ERC claim,
- And the IRs has not paid your claim or the IRS has paid your claim and you have not cashed or deposited the refund.
You cannot withdraw if:
- The credit you are trying to withdraw was filed on an original tax return,
- You are trying to withdraw only a portion of your ERC,
- Your adjusted return (Form 941-X, etc.) reports tax items not on your original return in addition to the ERC claim,
- You need to make other corrections to your return,
- You received your ERC refund and cashed or deposited the refund check or,
- You received a notice or letter form the IRS disallowing the entire amount of your ERC.
What to Watch out for:
The IRS has issued warnings about ERC schemes being pushed by ‘tax promoters’ across the nation. The IRS defines tax promoters as those who “…undermine voluntary compliance by marketing improper methods to reduce the amount of taxes legally owed.”
Warning signs to watch out for from promoters
- Unsolicited ads, calls, emails or texts from someone you don’t know
- Statements that the promoter or company can determine your ERC eligibility within minutes
- Large upfront fees to claim the credit
- Pressure to accept a promoter’s offer of a refund anticipation loan
- Fees based on a percentage of the refund amount of ERC claimed – you should always avoid a tax preparer basing their fee on the amount of the refund
- Statements from the promoter that you qualify for the credit before any discussion
What is being done to combat fraudulent filings?
The IRS is conducting ongoing criminal and civil investigations. Currently, there are 242 open investigations encompassing $2.8 billion in fraudulent claims. 
How do I report ERC abuse?
To report ERC abuse, submit Form 14242, Report Suspected Abusive Tax Promotions or Preparers. People should mail or fax a completed Form 14242, and any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations.
Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405
Fax: 877-477-9135
Links for more information 
Employee Retention Credit Eligibility Checklist: Help understanding this complex credit
Withdraw an Employee Retention Credit (ERC) Claim
Webinar: Employee Retention Credit: Latest information on the Moratorium and Options for Withdrawing or Correcting Previously Filed Claims
Additional Assistance
Any constituents looking for assistance can reach out to the Norwich district office and speak to Noah Carver, the IRS caseworker for Congressman Courtney. 
Noah Carver
Staff Assistant
Office of Congressman Joe Courtney (CT-2)
55 Main St. Suite 250 | Norwich, CT 06360
P: 860.886.0139 | C: 860.373.4301 | F: 860.886.2974