While businesses across the United States, including doctors and medical practices, have taken advantage of the Employee Retention Credit (ERC) over the past two years, the federal government has announced a pause on the program that will impact businesses still considering an application. The pause does not mean an end to the program, but it will delay refunds and push back the timeframe for hesitant filers to receive the refund. These are the details announced by the IRS in a Sept. 14, 2023, memorandum:
The IRS moratorium on ERC claims
The IRS has hit the brakes on processing new ERC claims, and it’s all due to concerns about fraudulent claims. The moratorium is aimed at protecting small business owners, including doctors, from falling victim to scams. IRS Commissioner Danny Werfel believed his agency needed to take action in response to growing concerns within the tax agency and reports of numerous ineligible ERC claims. In fact, the program has become so wrought with fraud that the IRS has added unethical ERC preparers to its list of Dirty Dozen tax scams. If you’re a doctor still considering filing for the ERC, it makes sense to follow the developments of the moratorium to determine when it’s best to apply, most likely in 2024.
Impact on ERC Claims Processing Times
For doctors who have already filed ERC claims, the moratorium probably means longer processing times for those still waiting to receive a refund. The IRS is now focusing on reviewing existing claims for compliance concerns. This is how the IRS describes the delay in delivering refunds:
“Processing of returns that involved the [ERC] has slowed due to the complexity of the amended returns and the increase in aggressive and misleading marketing campaigns luring taxpayers into claiming the ERC when they are not eligible for it. There are very specific eligibility requirements for claiming the ERC, so all claims must be reviewed by an IRS employee. We apologize for the delay.”
This intensified scrutiny includes more audits and criminal investigations into promoters and businesses that have submitted questionable claims. The IRS has already identified hundreds of criminal cases and referred thousands of ERC claims for audit. As a result, the processing time for existing ERC claims will extend from the usual 90 days to 180 days or even longer if further review or audit is necessary.
Safeguarding legitimate ERC claims
While the increased compliance review may seem burdensome, it’s an important step to protect against fraud. Doctors, like all business owners, should be aware that improperly claimed ERC funds can result in severe penalties and interest payments. The IRS says it is determined to prevent this and is actively working on adding new protections and safeguards to prevent fraudulent claims from being submitted.
What you can do during moratorium
If you’re a doctor still considering an application for the ERC, there are some important steps to take during the moratorium period:
- Review Your Eligibility: Ensure you meet all ERC eligibility criteria. The IRS provides guidance and tools on their website to help you determine your eligibility.
- Seek Professional Advice: Consult with trusted tax professionals who can guide you through the ERC claiming process, ensuring compliance and accuracy. Be wary of all the marketing that still infiltrates the media. It’s best to use a trusted Certified Public Accountant, if you can.
- Prepare for Extended Processing Times: If you’ve already filed an ERC claim, be prepared for extended processing times. Patience is key during this period.
- Consider Waiting: If you haven’t filed an ERC claim yet, carefully review the guidelines, and consider waiting until the moratorium ends to avoid complications.
- Review Pending Claims: Doctors with pending ERC claims should review them carefully and consider withdrawing if they believe the claim was submitted improperly. The IRS will provide more details on a settlement program for repayments in the fall.
