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September 28, 2023

The IRS Has Stopped Processing ERC Claims Because ERC Mills Are Scamming the F*ck Out of Them

Internal Revenue Building Sign in Washington DC

The IRS announced today that it has issued an immediate moratorium on processing new employee retention credit claims at least through the end of the year. The agency cited “rising concerns about a flood of improper Employee Retention Credit claims,” driven by “aggressive promoters,” as the reason for closing the door on ERC claims.


IRS Commissioner Danny Werfel ordered the immediate moratorium, beginning today, to run through at least Dec. 31 following growing concerns inside the tax agency, from tax professionals as well as media reports that a substantial share of new claims from the aging program are ineligible and increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing.

The IRS continues to work previously filed Employee Retention Credit (ERC) claims received prior to the moratorium but renewed a reminder that increased fraud concerns means processing times will be longer. On July 26, the agency announced it was increasingly shifting its focus to review these claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS announced today that hundreds of criminal cases are being worked, and thousands of ERC claims have been referred for audit.

Cue loud gulp sounds echoing through the halls of ERC mills across the country.

With the stricter compliance reviews in place during this period, existing ERC claims will go from a standard processing goal of 90 days to 180 days – and much longer if the claim faces further review or audit. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.

“The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in,” Werfel said. “The further we get from the pandemic, the further we see the good intentions of this important program abused. The continued aggressive marketing of these schemes is harming well-meaning businesses and delaying the payment of legitimate claims, which makes it harder to run the rest of the tax system. This harms all taxpayers, not just ERC applicants.”

To protect taxpayers from scams, IRS orders immediate stop to new Employee Retention Credit processing amid surge of questionable claims; concerns from tax pros [IRS news release]

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  1. Better late than never. People belong in jail. The fraud has been going on for over two years now. Billions have been stolen. The numbers the IRS cites are going to wind up being the tip of the iceberg. Anytime there is a fee contingent on a result there is a powerful incentive to cheat – that’s why contingent fees are outlawed by the CPA code of conduct and by Circular 230. People have been openly taking 25% off the top – it’s an absolute disgrace this has gone on as long as it has. The promotional ads have been an open assault on the profession – “your CPA doesn’t know what he’s talking about.” Lock ’em up.

  2. The ERC was a poorly written piece of legislation. Everyone’s business was impacted by the anti-business lockdowns. As long as you did not take a forgivable PPP loan and revenues went down, there is a good case to be made for your company. This isn’t the ERC mills fault, it’s poor governance during and after the pandemic.

    1. I agree that the ERTC legislation could have been written better, I agree that the process has been poorly managed. But the ERC Mills deserve to be judged based on the quality of their work or lack thereof. There are certainly victims aplenty here, beginning with the US taxpayer. But the people who are sitting behind the scenes here collecting $billions in fees and hiding behind small businesses whom they have defrauded and then behind power of attorney signers (you can’t tell a Mill is involved from the 941X, they get a preparer to sign a POA with the client but the Mill does not put its name on the return) deserve no sympathy whatsoever. Lock ’em up.

    2. “Everyone’s business was impacted by the anti-business lockdowns.”

      Well then, good thing the legislation isn’t written to say that any business that was “impacted” qualifies.

      “As long as you did not take a forgivable PPP loan and revenues went down, there is a good case to be made for your company.”

      Not sure what the complaint is here. Aren’t the companies whose revenues went down generally seen as the claimants that are actually more deserving of the credit?

      “This isn’t the ERC mills fault, it’s poor governance during and after the pandemic.”

      Nah, it’s actually the fault of the shady operators filing claims for people who clearly don’t qualify.

  3. I agree, the ERC was amended three times and has vague provisions. That said, many ERC mills ignore parts of the law to get business.

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