ERC Claims Paused by IRS: What you need to know

By: Justin DiLauro, Partner and Chief Quality Officer

As many may be aware, the Internal Revenue Service (IRS) issued a temporary pause (a “moratorium”) on the processing of new claims for the Employee Retention Credit (ERC) starting on September 14, 2023 and concluding on December 31, 2023.  See IR-2023-169 (click here).  The IRS claims to be on the side of the taxpayer on this one; specifically citing its desire to route out unscrupulous service providers that may be providing studies under aggressive (or worse) positions and/or or may be guilty of other undesirable (or worse) marketing and messaging tactics.

At BRAYN, our first thought is one of calm in that our clients should sleep well at night because our approach on ERC (and all tax incentives) is one of being conservative in nature, and additionally, the IRS has broad federal tax enforcement powers but cannot make law and cannot permanently eliminate the ERC that the legislative-body, Congress, has afforded us with enactment in Title 26 of the United States Code.

BRAYN Clients Should Remain At Ease

It is clear that the IRS is seeing all the aggressive unsolicited marketing emails, and even cable television commercials with none other than Phil Dunphy as the spokesperson, from unscrupulous service providers that are also providing fully contingent-success-based fees.  In the same marketplace, it is being seen that some service providers are providing bogus/canned/boilerplate study reports to many different taxpayers in volume, and many qualifications for the ERC are incredibly suspect to potentially even worse.

To be clear, BRAYN Consulting LLC does not, has never, and will never engage in such tactics – not even remotely.  For one, we stay true to our Fixed Fee/Rate model that is both fully IRS Circular 230 compliant and reasonable in light of the expected gains from the various tax incentives we service.  BRAYN does not aggressively market.

As for some of these tactics of the other providers, there may be a debate as to some legality or not, but regardless, the IRS has historically not treated these approaches kindly, and when it comes to Treasury dollars and overflowing their already burdened system, never be surprised when the IRS will exercise its broad enforcement powers and halt something like the ERC for about 3.5 months.

Valid Taxpayers With Valid Claims and Quality Studies Should Remain At Ease

Ultimately, it needs to be stressed and continually re-stated that, while the IRS has broad powers to issue such a pause in processing of a specific tax incentive, Congress afforded us the ERC credit by passing a law, along with the ability to claim of refund within a three-year statute of limitations for amending.  As such, this moratorium (and any successors of it) can only be temporary (3-6 months) to add on top of the already existing timeframe and delays from the IRS.

The important takeaway, however, is for all taxpayers to ensure that they are well-protected with a quality study from a reputable service provider, like BRAYN, or otherwise seek a second opinion for a prior claim.

IRS Circular 230 Disclosure – To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.