On Thursday, September 14, the IRS issued an announcement regarding the Employee Retention Credit (ERC) program. This IRS release contained two major updates: 1) a pause in processing new ERC filings and 2) a significant increase in processing timelines.
What do these changes mean?
- Pause in processing – The IRS will cease processing any new ERC filings until at least January 1, 2024. This means that while the IRS will continue to accept new ERC filings, they will not review them nor issue refund checks until at least January next year.
- Increase in processing timeline – The IRS increased their standard processing goal from 90 days to 180 days. This means the IRS now aims to process ERC filings over six months. Keep in mind that this 180-day processing timeline is a goal, not a deadline. Over the period in which the IRS aimed to process ERC in 90 days, many ERC processors experienced processing timelines of 120+ days.
Why did the IRS make these changes?
The announcement primarily allows the IRS to:
- Clear through existing filings – There are more than 600,000 filings with the IRS that still need to be processed. The pause enables the IRS to catch up on the backlog of existing ERC filings, while the increased processing timeline provides the IRS with more time to review filings before issuing refund checks.
- Announce and create new procedures – In response to potential fraudulent ERC claims, the IRS appears to be enhancing its review process to prevent ineligible companies from receiving the credit and to ensure eligible companies receive the credit only for specific periods of eligibility.
- Reiterate the importance of eligibility – Amidst aggressive marketing campaigns, misstating that ERC is risk-free and everyone is eligible, the IRS repeated the importance of choosing the right ERC processor and understanding the specifics of the eligibility determination for your business. Business owners are encouraged to reflect on already-filed ERC claims as well as any ERC claims under consideration for filing.
What should you do now?
If you already filed for ERC:
If you filed for ERC before September 15th, your ERC refund check may not arrive before mid-2024. You may consider exploring faster funding options, such as NEWITY’s ERC Advance. ERC Advance allows you to receive cash for your ERC refund within days while effectively receiving a second opinion from NEWITY about your ERC eligibility and credit amount.
If you have not filed for ERC:
Review your ERC processor options, choose a company wisely, and ensure you feel comfortable with your ERC eligibility. Both the IRS and NEWITY have written several articles outlining red flags in ERC processors and eligibility nuances, which are linked below:
- Three Red Flags to Look Out for in ERC
- Not All ERC Processors are Created Equal
- Letter From Our CEOs
- Warning Signs for misleading Employee Retention Scams
If you think you are eligible, do not delay. It’s important to keep in mind that the deadline for claiming 2020 credits is April 15, 2024, and the deadline for 2021 credits is April 15, 2025. Many small businesses may wait until January 2024 to find an ERC processor, which may cause a rush on qualified ERC processors and result in businesses scrambling to file ERC claims before program deadlines.
Once you decide to file, use a trusted company and retain all documentation supporting your ERC eligibility and credit amount. Companies like NEWITY provide an extensive memos outlining your exact qualification criteria as well as detailing the specifics of your credit amount.
If you want to access your refund before late 2024, consider applying for a program with ERC financing built-in, like NEWITY’s ERC Fast Track. ERC Fast Track includes our stringent and thorough eligibility and calculation processes and allows you to receive cash for your ERC claim within days of filing with the IRS.
NEWITY is here to support your small business throughout the ERC process and keep you informed along the way. If you have any questions, please reach out to our support team at (773) 839-8089.