IRS Suspends ERC Applications: What Small Business Owners Need to Know

The IRS has temporarily stopped accepting new ERC applications, but what should do in the meantime.

Staff Writer

10/24/20232 min read

coffee mug near open folder with tax withholding paper
coffee mug near open folder with tax withholding paper

On September 14, 2023, the Internal Revenue Service (IRS) announced that it was suspending all new applications for the Employee Retention Credit (ERC). This decision was made due to concerns about a surge of fraudulent ERC claims.

The ERC is a refundable tax credit that was created to help businesses offset the cost of retaining employees during the COVID-19 pandemic. The credit is available to businesses that experienced a decline in revenue or were partially or fully suspended due to government orders.

The IRS has stated that it will continue to process existing ERC claims, but it is unclear when it will start accepting new applications again. In the meantime, businesses that believe they may be eligible for the ERC should continue to gather documentation and prepare their claims.

What does this mean for small business owners?

If you are a small business owner, there are a few things you should keep in mind in light of the IRS suspending ERC applications:

  • If you have already submitted an ERC claim, the IRS will continue to process it. However, it may take longer than usual for your claim to be processed.

  • If you have not yet submitted an ERC claim, you should continue to gather documentation and prepare your claim. However, you will not be able to submit your claim until the IRS starts accepting new applications again.

  • If you are unsure whether you are eligible for the ERC, you should consult with an accountant or tax advisor.

How can I prepare my ERC claim?

To prepare your ERC claim, you will need to gather the following documentation:

  • Your business's quarterly employment tax returns (Form 941)

  • Your business's financial statements

  • Documentation of any government orders that affected your business

  • Documentation of any decline in revenue that your business experienced

Once you have gathered this documentation, you can start preparing your ERC claim. You can do this by using the IRS's ERC calculator or by working with an accountant or tax advisor.

How can I avoid ERC fraud?

The IRS has warned about a surge of fraudulent ERC claims. Here are a few tips to help you avoid ERC fraud:

  • Be wary of any promoter or advisor who promises you a guaranteed ERC refund.

  • Do not pay any upfront fees to file an ERC claim.

  • Be sure to file your ERC claim with the IRS directly.

  • Do not provide any personal or financial information to anyone who is not authorized by the IRS to receive this information.

Conclusion

The IRS's decision to suspend ERC applications is a setback for small businesses. However, it is important to remember that the IRS is taking this step to protect taxpayers from fraud. If you believe you may be eligible for the ERC, you should continue to gather documentation and prepare your claim. You can submit your claim once the IRS starts accepting new applications again. If you need any assistance gathering documentation, don't hesistate to contact one of our experts who can guide you along the way.