ERC Moratorium Update: IRS Continues to Slow Processing of Claims

Background on the ERC Moratorium

The Employee Retention Credit (ERC) has been a vital lifeline for many businesses during the economic challenges brought on by the COVID-19 pandemic. However, on September 14, 2023, the IRS instituted a moratorium on processing any new returns claiming the ERC. This decision was aimed at managing the overwhelming volume of claims and ensuring thorough compliance reviews.

Current Status of ERC Claims Processing

As of June 20, 2024, the IRS has announced that the ERC processing moratorium will remain in place. This means that any ERC claims submitted after September 14, 2023, will not be processed at this time. For claims submitted before the moratorium, the IRS is continuing to process them but at a much slower rate.

Processing Statistics and Expectations

Since the moratorium was put into place, the IRS has processed approximately 28,000 ERC claims, averaging 700-800 claims per week. This is a stark contrast to the processing pace prior to the moratorium being put in place. With around 800,000 pre-moratorium claims and a total of approximately 1.4 million ERC claims outstanding, the backlog remains substantial.

IRS's Approach to High-Risk and Low-Risk Claims

The IRS has outlined a strategy to handle the backlog:

• High-Risk Claims: 10% to 20% of the highest-risk claims will be disallowed.
• Low-Risk Claims: 10% to 20% of the lowest-risk claims will be refunded.
• Remaining Claims: The IRS will conduct additional analysis to gather more information with the goal of improving the compliance review process.

In line with this strategy, the IRS has emphasized that the oldest claims will be prioritized and processed first.

Slow Refund Issuance

The IRS has acknowledged that the pace of issuing refunds is dramatically slower than before the pandemic. Since September 2023, only 28,000 payments of ERC refunds have been issued, which translates to an average of fewer than 750 refunds per week. The IRS projects a slightly higher rate of payments later this summer, but taxpayers should be prepared for continued delays.

Impact on Businesses

For many businesses, the slow processing and delayed refunds pose significant challenges. The ERC was designed to provide financial relief quickly, and the extended processing times are causing frustration and financial strain for those awaiting their refunds.

Conclusion

The IRS continues to navigate the complexities of the ERC claims process amidst unprecedented demand and scrutiny. While the moratorium remains in place and processing rates are slow, businesses are advised to remain patient and ensure all necessary documentation and compliance requirements are met to facilitate smoother processing of their claims.

If you have any questions or need assistance with your ERC claims, please contact us. Our team of tax professionals is here to help you navigate the complexities of this process. You can contact us at (202) 455-6010 or by scheduling a confidential consultation.