When COVID-19 first started, small and midsized businesses (SMBs) were disproportionately affected by nationwide shutdowns and lost income. The Employee Retention Credit (ERC) or Employee Retention Tax Credit (ERTC) was part of the federal government’s attempt to help these businesses stay afloat by funding certain payroll expenses.
Even as we come out of the pandemic, the ERC plays an essential role in helping SMBs return to normal. However, scammers and promotors have encouraged many businesses to apply under fraudulent circumstances that make them money and leave the businesses in major legal trouble.
To combat this, the IRS placed a moratorium on ERC applications through the end of 2023. New applicants will have to wait until the start of 2024 to submit applications and will face new guidelines and waiting periods to receive approval.
What Changes Are Coming to the ERC Program?
Over the past three years, the IRS has noticed trends of fly-by-night organizations using aggressive marketing tactics that push businesses to file questionable claims so that they can collect fees from it. As these promotions become more commonplace in the market, the IRS is responding by revamping its selection process to ensure honest, well-meaning SMBs receive the funds they need. Starting in 2024, the ERC program will return with improvements to achieve this goal, such as:
- Enhanced review: The most important change to note is that every application will go through an enhanced review prior to approval. The IRS will pay particularly close attention to applications with minimal information that request credit in mass quantities and have little history with the IRS.
- Extended processing time: To allow for the enhanced review, the average processing time is expected to rise from 90 to 180 days.
- Victim initiatives: Applicants who fall victim to a scammer or promoter will be able to go through a settlement process to correct their credits.
- Claim withdrawals: Applicants will have the opportunity to withdraw their applications before they go through the approval process if they believe they have been scammed or have misrepresented their business, avoiding penalties and contingency fees.
How This Affects New Applicants
Businesses looking to apply for the ERC will have to find other ways to keep up with their expenses through the rest of 2023 and the beginning of 2024. Though applications are expected to return in January of 2024, the extended processing time means it may take months to get approved, even if your application is perfect.
Because your application will face stricter evaluation and go through more extensive processing, it needs to be fully and properly filled out and submitted with any additional materials to prevent delays. The best way to do so is to work with tax professionals like the team at Polston Tax.
How This Affects Current ERC Users
Though the moratorium states that new applicants to the program will not be accepted until 2024, the IRS is still processing applications submitted before the moratorium went into effect and working with current users to minimize complications. Businesses currently relying on the ERC to cover their expenses will still receive payments. However, the payments will come at a slower rate as the IRS completes detailed compliance reviews.
Prepare for What’s Next With Polston Tax
If you’re considering applying for the Employee Retention Credit after the moratorium ends, the best way to ensure fast approval is to work with tax professionals who can guide you through every step. With a team like Polston Tax, you can feel confident you’re filling out each form correctly and providing the IRS with everything they need to approve you for the ERC. We have more than 100 years of collective tax experience and have worked with ERC applicants since the program started.
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