IRS Employee Retention Credit Freeze 2023
IRS has placed a “moratorium” (or freeze) on the Employee Retention Credit application processing for the remainder of 2023. This means that IRS has frozen handling all new Forms 5884-A submitted for the ERC. Until further notice, this ERC application freeze remains through December 31, 2023.
Why Did This ERC Freeze Happen?
Sifting through the news talking points, there seem to be 2 main reasons:
First, the IRS has received more applications than it can process in a reasonable amount of time. It currently has over 600,000 applications still waiting, and IRS is making a more detailed review of all new applications. All claims previously filed will be processed, but it takes time.
Second, the U.S. government fears that it is getting scammed by many of these claims for the credit. Therefore, the IRS is greatly increasing audits and criminal investigations of ERC promotors that prepare fraudulent applications or promise everyone an automatic $26,000 per employee.
Is this IRS ERC Freeze Bad News for Me?
You may be one of many asking yourself, “Wait a minute — what about my Employee Retention Credit?” Don’t worry. You did not miss your opportunity to apply. IRS expects to resume accepting new applications beginning January 2024.
Until then, Tax Law Offices recommends that you begin your application process now. Gathering all necessary information will take some time. Also, the qualification and calculation process should be careful and well-documented. There really is no such thing as being “instantly qualified” to receive the ERC.
This is not bad news. Your ERC claim may take longer than you desire. Still, this temporary freeze allows you to receive good guidance from your tax lawyer, to avoid later troubles from IRS.
Caution: Submitting a properly qualified, correctly calculated claim for the Retention Credit is not simple. A fraudulently prepared claim could result in an expensive IRS tax audit. Or worse, it could lead to an IRS criminal investigation. All payroll tax matters (including ERC claims) carry certain legal pitfalls. Tax Law Offices suggests that you only use a well-recommended, professional firm to assist with your ERC application. Ask our attorneys for their recommendation, based on your situation.
See this related 1-minute story, Am I in Trouble Over These Payroll Taxes?