IRS suspends processing of a small business tax break due to a rise in dubious claims

Last Updated on September 15, 2023 by Robert C. Hoopes

IRS Commissioner Halts Processing of Small Business Tax Break Claims

In a move aimed at curbing fraudulent claims, IRS Commissioner Danny Werfel has directed a temporary halt to the processing of new claims for the employee retention credit (ERC), a tax break created to assist small businesses during the Covid-19 pandemic. The ERC can be worth thousands of dollars per employee, but it has recently attracted a surge of specialist firms making false promises to businesses about qualifying for the credit.

Werfel expressed concern that the program, which was designed to provide relief to struggling small businesses, has been exploited by aggressive promoters seeking to take advantage of the situation. The erroneous promises and misleading information being offered by these firms have prompted an urgent need to suspend new claims until the matter can be further investigated.

The temporary pause on processing new ERC claims will remain in effect until at least the end of 2023. This decision reflects the IRS’s commitment to protecting small businesses from falling victim to fraudulent schemes. However, it may also cause frustration for eligible businesses who genuinely require the tax break to stay afloat during these challenging economic times.

Furthermore, existing claims may also experience delays as a result of this halt. Normal processing times, typically taking around 90 days, could be extended to 180 days or even longer. This delay is expected to pose additional challenges for businesses relying on the ERC to provide much-needed financial relief.

The IRS has advised small businesses to exercise caution when approached by firms promising substantial ERC benefits. It is crucial for business owners to thoroughly research and verify the legitimacy of any claims made before committing to any agreements. By taking this precautionary step, businesses can protect themselves from falling victim to false promises and potentially fraudulent practices.

While the pause on new claims processing and potential delays may be seen as a setback for some businesses, the IRS’s actions aim to safeguard small enterprises from unscrupulous individuals seeking to exploit the employee retention credit. As investigations into fraudulent activities intensify, the IRS remains committed to ensuring that genuine businesses receive the financial assistance they are entitled to, without becoming prey to false claims and misleading tactics.