IRS Suspends Processing of ERTC Claims: What You Need to Know

Key Podcast Highlights

• The IRS recently stopped processing Employee Retention Tax Credit (ERTC) claims.

• What Is the ERTC?
  • The ERTC was introduced back during COVID.
  • It was a pandemic related tax credit that offered money back or help to employers who continued to retain their employees during the middle of COVID.
  • During certain quarters of 2020 and 2021, small businesses were eligible for this credit if they were partially or fully shut down by a COVID lockdown or restriction.
  • They were also eligible if they had a revenue loss, depending on the quarter.
  • This means, as a business owner, you could go back and amend your payroll tax returns and claim a credit against the payroll taxes you paid. If the credit was bigger than the taxes you paid, the government would give you money back as a refundable tax credit.
• Why Has the IRS Stopped Processing Claims for This Credit?
  • Less desirable firms are taking advantage of this credit.
  • These firms have been calling and sending out emails stating you can get millions of dollars back from the government.
  • This has proliferated to the point where the IRS is stopping the processing of claims for the ERTC credit.
  • The IRS is now investigating and getting to the bottom of these claims.
• What Does This Mean If You’ve Submitted a Claim?
  • If you’ve submitted a claim or amended your return so that you can take advantage of the credit and received your refund, you have nothing to worry about, as long as everything is legitimate.
  • If you’re concerned about if it was legitimate or if you were truly eligible, you should go to a tax professional or your payroll service company and have them review the amended return you used to get the refundable tax credit. They can tell you if it was legitimate or not.  
  • If your claim is found to not be legitimate, you can file to withdraw the claim and return the money.

Transcript

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Gene (00:02):

Hey everybody, it’s Gene Marks and welcome to another episode of The Hartford Small Biz Ahead. Big news that you need to be aware of regarding the Employee Retention Tax Credit. Just recently, the IRS has stopped processing this credit. So let’s take a step back, first of all, and make sure that we know what this is because this may have a big effect on your business. The Employee Retention Tax Credit was introduced back during COVID. It was a pandemic related tax credit that offered, money back or help to employers who continued to retain or employ their employees during the middle of COVID. The calculation is such that during 2020 certain quarters and certain quarters of 2021, you would be eligible for this credit if either you were partially or fully shut down by a COVID lockdown or restriction, or if you had a revenue loss, depending on the quarter that you were in, and depending on the quarter that you were in, whenever these events could have occurred, you could go back and amend your payroll tax returns.

Gene (01:05):

Those are your federal 941 returns and claim a credit against the payroll taxes that you paid. And if the credit was bigger than the taxes that you paid, the government would actually give you extra money back. It’s a refundable tax credit. So it’s been a big, big thing for a lot of businesses and a lot of my clients. Again, it’s called the Employee Retention Tax Credit. Unfortunately, a lot of less desirable firms have gotten out there and are taking advantage of this credit, and maybe you’ve gotten notification of it as well. Most of my clients have, you get emails or phone calls from these firms saying that you could get back millions of dollars from the government because of this Employee Retention Tax Credit. Well, that kind of less desirable activities has proliferated such to the point where the Internal Revenue Service just announced that they are halting, suspending the processing of the claims for this Employee Retention Tax Credit.

Gene (02:04):

They are investigating these and they want to get to the bottom of some of these more, less than desirable claims, and they want to take action against them. So what about you? Should you panic about this? Well, no, you should not. First of all, if you have submitted a claim or amended your return so that you can take advantage of the Employee Retention Tax Credit, and if you’ve already gotten your refund, and if it’s completely legit, then you’ve got nothing to worry about. If you have a concern about whether it was legit or if you were truly eligible for this, you should go to a tax professional or your payroll service company and have them review the amended return that you used to get this refundable tax credit, so that they can tell you if it was legit.

Gene (02:54):

Again, if it was legit, you’ve got nothing to worry about. If it was filed incorrectly or if a reputable tax professional says, no, this wasn’t legit, or you weren’t eligible and you really shouldn’t have gotten this credit. Again, don’t panic. The IRS right now is working on guidance on how to withdraw your claim. First of all, how to pay that claim back and settle with them. So be aware that it’s coming and you wanna keep an eye out and you wanna make sure that your tax professional is keeping an eye out too. What that means is that the IRS is gonna come up with a procedure so that you can file to withdraw this claim and return the money. If you do this and you’re proactive, it’s most likely that you won’t suffer any penalties or interest or any further recourse from the IRS.

Gene (03:45):

So, have a tax professional checkout your return if you think that your Employee Retention Tax Credit claim may have been incorrect, and then wait for guidance from the IRS and then go back and refile it or follow their guidance and return the money, and you should be fine. Now, let’s say that you have filed it, but you haven’t received the money yet. But again, your tax professional takes a look at the return and says, you really weren’t eligible and you shouldn’t have filed this. Well again, don’t panic, wait, it’s an unprocessed claim. The IRS is gonna come out with guidance for you on how to deal with that. Most likely, you will have some ability to take back that unprocessed claim before any money is issued. But again, like I said before, if you do get a check from the IRS and it’s determined or you determine, or your tax professional determines that you really weren’t eligible for this credit, then you’re gonna wanna return that money and follow the guidance that the IRS will be issuing.

Gene (04:49):

Now again, if you think your claim is fine, even if it’s unprocessed, then there’s, you don’t need to be doing anything. And not only that, but these claims, this tax credit doesn’t expire until beginning in 2024 through 2025. So you still have time to file for the Employee Retention Tax Credit if you think you’re legitimately eligible for it. So you can still go forward with that process, even though the IRS has suspended their processing of these returns, it is gonna pick up again. They are gonna resume it at some point. So it shouldn’t stop you. If you or your tax professional or your payroll service company has determined that, yeah, you’re legitimately eligible and you’re gonna file this amendment to take advantage of the Employee Retention Tax Credit, go ahead and do it.

Gene (05:36):

That’s completely fine. So the bottom line is this, the Employee Retention Tax Credit right now has been suspended as far as processing is concerned, hasn’t been canceled or anything like that, but the IRS is reviewing it. If you think that you are eligible and everything is fine and your tax professional has reviewed your returns and whether you’ve gotten the money back or you’re still waiting for the money, you don’t have to do anything at all other than just being patient. And by the way, from what I’m hearing from the IRS, if you’re still waiting for the money, it could be easily another three to six months until you see it. So prepare for that. However, if you have filed an amendment to your 941, if you have received money back from the IRS or if you’re expecting to receive it because of the Employee Retention Tax Credit, and you determine with your tax professional that you’re really not eligible or there was a problem with the filing, don’t panic.

Gene (06:30):

But you’re gonna have to either return the money or definitely notify the IRS and the IRS is soon coming out with guidance about how to do that. So make sure that you do that to avoid any problems, let alone penalties and interest if you delay. My name is Gene Marks and you’ve been listening to the Hartford Small Business Ahead podcast, and this has been all about the Employee Retention Tax Credit, and I hope this information helps. If you need any advice or tips or help in running your business, please visit us at SmallBizAhead.com or SBA.TheHartford.com. We’ll be back to you next week with another episode or two of this great podcast to help you run your business. Thanks so much for listening. We’ll see you then. Take care.

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