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In a swift response to a surge in fraudulent claims, the IRS has halted processing Employee Retention Credit (ERC) claims until December 31, 2023, citing a flood of improper applications (IRS News Release IR-2023-169). The move comes as the agency collaborates with the Justice Department to pursue criminal cases against hundreds of taxpayers involved in fraudulent ERC claims, uncovering over $8 billion in fraud related to pandemic provisions (IRS News Release IR-2023-169).

The IRS allows eligible businesses to withdraw their claims to combat scams, but this doesn’t exempt them from potential criminal prosecution (IRS News Release IR-2023-193). The agency will continue to receive ERC claims during the moratorium but will not process them until next year, emphasizing extra scrutiny for previously submitted claims.

To assist businesses, the IRS has issued guidance on ERC eligibility, warning against improper claims, citing supply chain issues, and stressing the need for adherence to eligibility criteria (IRS News Release IR-2023-170). A Generic Legal Advice Memorandum (GLAM) clarifies scenarios where supply chain disruptions may or may not qualify for ERC eligibility, highlighting the narrow scope of the exception (AM 2023-005).

As businesses grapple with the complexities of ERC eligibility amidst scam prevention measures, the IRS’s moratorium raises questions about legitimate claims and intensifies scrutiny of application processes.

Source ( Journal of Accountancy News).