KBKG's ERC Guidance for CPAs and Tax Professionals

Thought Leadership by KBKG 

Regarding the latest IRS rules and regulations on the Employee Retention Tax Credit program, it’s paramount for Certified Public Accountants (CPAs) and Tax Professionals to stay ahead of the curve. The Internal Revenue Service (IRS) recently introduced a moratorium on processing Employee Retention Credit (ERC) claims. This move was driven by concerns over widespread fraudulent claims, and could lead to an overhaul in the ERC claims process moving forward.  In this blog, we will explore the intricacies of this temporary suspension and guide how to navigate the evolving ERC landscape while upholding the highest standards of integrity and compliance. 

Understanding the IRS Moratorium

1. Reasons Behind the Moratorium 

The IRS initiated the moratorium on ERC claims processing due to a raft of fraudulent claims. The IRS has received 3.6 million Employee Retention Credit (ERC) claims as of June 2023. The IRS suspects that 95% of the most recent claims are invalid and are attempting to address this issue.  

The IRS currently has a backlog of 600,000 pending ERC claims. 

The agency’s goal is to safeguard the integrity of the ERC program and prevent it from falling victim to fraudulent claims. CPAs and Tax Professionals must be aware of the backdrop to comprehend the significance of the moratorium. This development is not merely a bureaucratic shift but a response to the urgent need for greater transparency and accuracy in ERC claims. 

2. Investigations and Audits 

As a result of the numerous fraudulent ERC claims received, the IRS has launched investigations with the Department of Justice and referrals for audits. This underscores the importance of ensuring that your clients’ ERC claims meet all eligibility criteria and can withstand IRS scrutiny. 

The Role of CPAs and Tax Professionals

CPAs and Tax Professionals are poised to play a pivotal role in this evolving landscape. Here’s how: 

3. Guiding Clients on Claim Validity 

Clients rely on your expertise to navigate the complexities of tax regulations. With the ERC program in flux, it’s crucial to assist your clients in assessing the validity of their claims. Conduct a comprehensive review of their eligibility, ensuring all requirements are met. Clients should be well-informed about the ERC eligibility criteria. 

4. Voluntary Claim Withdrawals 

The IRS urges claimants who don’t qualify to voluntarily withdraw their claims. This presents an excellent opportunity for CPAs and Tax Professionals to advise their clients on a simpler process than the settlement program. Educate clients about the benefits of voluntary withdrawal, which can prevent potential audits, fines, and penalties. 

IRS Updates and Settlement Program

5. Upcoming Changes 

The IRS is not merely halting ERC claims; it is also in the process of updating the ERC claims process itself. Although specific details are expected to be released in January, it’s essential to stay abreast of these changes. This will allow you to prepare your clients for the revised process and ensure their compliance with new requirements. 

6. Settlement Program 

Additionally, the IRS will introduce a settlement program aimed at addressing non-compliant ERC claims. The instructions for participation in this program are anticipated to be available before 2024. As a CPA, this is an area where you can provide valuable guidance to clients who may find themselves in need of resolution. 

Managing Delays and Expectations

7. Delays in Receiving Credits 

It’s important to communicate to your clients that, even if they have legitimate ERC claims, they may experience delays in receiving refund checks. This is a direct result of the IRS’s heightened scrutiny and audit referrals. However, the critical point to convey is that their claims are still in the pipeline, undergoing the necessary review and processing. 

KBKG's Last Word

 The IRS’s moratorium on ERC claims is not just a regulatory pause; it’s a call to action for CPAs and Tax Professionals. Your expertise is instrumental in guiding clients through the evolving ERC landscape, helping them assess claim validity, and preparing for the forthcoming changes and the settlement program. 

In these uncertain times, your role as a trusted advisor has never been more critical. Your clients rely on your knowledge and guidance to ensure they navigate the ERC program with integrity and compliance. Stay informed, stay vigilant, and continue to be a beacon of trust in the ever-evolving world of taxation.