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IRS Keeps Employee Retention Credit (ERC) Filing Moratorium in Place So it Can Focus on Fraud Enforcement

Offshore Account Update

Posted in on June 28, 2024

The Internal Revenue Service (IRS) recently announced that it is keeping the moratorium on new Employee Retention Credit (ERC) filings in place so that it can focus on fraud enforcement. The IRS has a substantial backlog of pre-moratorium ERC claims to review, and while it anticipates restarting payments on valid claims “later this summer,” its primary focus is on uncovering and prosecuting ERC-related fraud. Virginia IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what this means for those who have concerns about their ERC filings.

The “Vast Majority” of ERC Claims Show Signs of Fraud According to the IRS

In its News Release announcing that the ERC filing moratorium will remain in place, the IRS also stated that the “vast majority [of ERC claims] show risk of being improper.” A recent review of ERC filings “confirmed concerns . . . that there was an extremely high rate of improper ERC claims,” and the IRS is now focused on making sure that fraudulent claims do not get processed.

However, the IRS is also taking additional steps to hold fraudulent filers accountable—and to prevent similar widespread fraud in the future. These steps include conducting audits and investigations that present risks for substantial penalties. According to the IRS’s News Release, thousands of audits and hundreds of criminal investigations are already underway.

How Can Business Owners (and Others) Avoid IRS Scrutiny for ERC Fraud?

With this in mind, business owners (and others) who have concerns about their ERC filings should figure out what they can do to protect themselves. If the IRS has already initiated an audit or IRS Criminal Investigation (IRS CI) has already launched an investigation, then avoiding unnecessary consequences will involve executing an informed and strategic defense. But, for those that are not yet facing scrutiny, available options may include:

  • Withdrawing a pending ERC claim
  • Submitting an amended filing (and paying any amounts due)
  • Submitting a voluntary disclosure to IRS CI

These are all options under different circumstances, and they are not necessarily the only options that are available. For those who have concerns about ERC fraud, informed decision-making is critical, and it will be important to seek advice from experienced tax counsel promptly.

Important: Taxpayers Should Be Wary of Relying on Informal IRS Guidance

While it is important for ERC filers to be aware of the IRS’s ongoing efforts to uncover and prosecute ERC fraud, it is equally important to avoid relying on misguided advice. This includes misguided advice from the IRS.

In its News Release, the IRS advises that “[n]o additional action [is] needed by taxpayers at this time.” But, this isn’t necessarily the case—especially for those who have concerns about their ERC claims. Not only can taking a wait-and-see approach increase the risks involved, but it can also limit the options you have available. Again, if you have concerns about an ERC claim, you should seek legal advice right away so that you can be sure you are making informed decisions with your best interests in mind.  

Get the Advice You Need from Virginia IRS Tax Lawyer Kevin E. Thorn

If you would like to discuss your ERC-related options with Virginia IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, contact us today. Call 703-752-3752 or send us your contact information online to schedule an appointment as soon as possible.

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