The heightened scrutiny concerning Employee Retention Credit (ERC) claims is eliciting mixed reactions among industry players. The Internal Revenue Service (IRS) announced in September 2023 that it would suspend the processing of new ERC claims until at least the start of 2024. The IRS cited concerns over the surge in improper ERC claims submitted by businesses, many of which enlisted the services of ERC claim promoters. Existing claims are also under review.
The IRS’s decision stems from a perceived increase in illegitimate claims, leading to concerns that many businesses may be involved in fraudulent activities in regards to the ERC. Notably, this suspension does not nullify the ERC, but rather, it’s a bold step by the IRS to curtail abuse of the employee retention initiative.
The agency’s move provides an opportune moment for corporations and businesses that have filed ERC claims to review their submissions. They may wish to consult with their legal or tax advisors to ensure compliance with the rules and regulations set out by the IRS. It’s an opportunity to correct, rectify or withdraw any claim that could place them at odds with the law.
Legal professionals, more than ever, must provide their clients with prudent advice regarding the ERC claims. Especially now that such claims are under strict limelight by the IRS. It is crucial that businesses understand the magnitude of violating the guidance provided by the tax body, given that such ignorance could result in severe penalties and fines.
You can read more detailed information about the IRS announcement on increased ERC claim scrutiny here, provided by Holland & Knight LLP.
This new development becomes a rallying call for corporations and legal advisors to engage earnestly to ensure that their respective clients stand up to the IRS’s scrutiny. The current climate insists on strict adherence to the rules. And those rules are designed not just to preserve the integrity of the tax system, but to ensure the smooth operation and survival of businesses across the country.