The Internal Revenue Service (IRS) has ordered an immediate halt to new Employee Retention Credit (ERC) claims, and announced plans for a future settlement program. The move comes amid growing concerns over fraudulent claims and exploitation of the tax relief measures intended to mitigate the financial impacts of the Coronavirus pandemic.
The ERC was enacted as a part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), and offers a fully refundable tax credit for employers that can be up to $26,000 per eligible employee. However, the large potential value of the ERC has attracted fraudsters, causing the IRS to become increasingly alarmed about small business owners being scammed.
According to the IRS, unscrupulous promoters have been attempting to trick ineligible employers into claiming the credit. In response, the IRS has decided to act, initiating an immediate stop to new claims. The agency advises that small business owners exercise caution and consult with a trusted tax professional before seeking to benefit from such credits.
In addition, the IRS has announced a future settlement program for those who have already filed invalid claims. Details on the specifics of this programme are still forthcoming, and employers who have filed such claims are urged to consult with their legal counsel.
This latest development serves as a stark reminder of the ongoing challenges faced by governments and enforcement authorities worldwide in implementing fiscal relief measures in response to the economic crisis caused by the COVID-19 pandemic. As such, legal professionals should ensure their clients are aware of and understand the implications of these changes.