On September 14, 2023, the IRS announced it has ceased processing new ERTC claims. The moratorium will last at least through the remainder of 2023.
The IRS has received over 3.5 million ERTC claims, and is behind on processing. They are now linking a recent influx of claims from ineligible taxpayers to illegal activity by third parties pressuring employers to apply by convincing them they are eligible for large refunds. Thousands of claims are being audited, and the IRS’ Criminal Investigation unit has begun over 250 investigations into nearly $3 billion in suspicious ERTC claims. Fifteen of those have yielded federal charges, including six convictions to date. Average incarceration time is 21 months. Note that employers who are deemed ineligible for the credit will not only have to repay the refund, but they will also owe interest and penalties. Businesses who already submitted an ERTC claim before September 14, 2023, can still expect their application to be processed, albeit at a slower pace. This applies to refunds as well, in light of the added compliance scrutiny now being done. Prior to the announcement, turnaround time for ERTC claims was about 90 days. Applicants can expect double that wait time now, and may get requests from the IRS for additional documentation.