I'm Blake Oliver, and this is a special update from the Accounting Podcast.
Today, we're talking about a major new development regarding the employee retention credit,
also known as the ERC. The IRS announced on Thursday that it is placing an immediate
moratorium on processing new claims for the ERC until at least the end of this year.
IRS Commissioner Daniel Wurfel said the agency has been flooded with questionable claims lately,
likely due to aggressive promotion of the credit by so-called ERC mills.
To combat fraud, the IRS has initiated over 250 criminal investigations related to bogus ERC
claims, totaling over $2.8 billion so far. 15 of those investigations have resulted in
federal charges to date. Thousands more claims have been referred for audit.
The IRS has received about 3.6 million ERC claims total with over 600,000 claims currently
awaiting review, nearly all received within the past 90 days. In the words of Commissioner
Wurfel, that means about 15 percent of all ERC claims received since the start of the program
three and a half years ago have been received in the last 90 days. That's an incredibly
large number to have so far beyond the pandemic and nearly two years after the time period covered by
the program. The Congressional Budget Office projected in 2021 that the program would cost 85
billion over a decade, but the IRS said on Thursday that it has already paid out 230 billion
in ERC refunds. The IRS will allow anyone in the group of 600,000 employers with a pending
claim to withdraw it during the moratorium. The agency is also building a special settlement
program to allow repayments for those who received an improper ERC payment. With increased scrutiny,
the IRS says processing times will rise from 90 days to 180 days for existing claims.
One issue driving many of the questionable claims is the supply chain disruption qualification.
The IRS says many claims wrongly assert eligibility due to supply chain issues that were not
caused by government orders. Contrary to some preparers advice, the agency clarified in July
that supply chain disruptions only qualify if a government mandate forced the business's
supplier to suspend operations. The IRS believes dishonest promoters have been misrepresenting
the supply chain eligibility criterion to small businesses. The IRS has put up a webpage with
answers about eligibility for the credit and red flags to look out for. You can find the link
in the show notes. We'll continue monitoring this developing story. This has been a special
news update from the accounting podcast. I'm Blake Oliver. Thanks for listening.