The Internal Revenue Service (IRS) has announced a moratorium on new claims related to the pandemic-era Employee Retention Credit (ERC, also known as Employee Retention Tax Credit).  The pause on new claims goes into effect immediately and will last until at least 2024. The IRS is currently working through a backlog of nearly 600,000 thousand requests, many of which are expected to fall short of eligibility requirements.

When claimed properly, the ERC is a refundable tax credit designed to help employers who continued to pay their employees while their businesses were fully or partially suspended during the COVID-19 pandemic. The credit was created in 2020 and has since expired, however, businesses have until April 2025 to submit amended returns to claim the credit. To date, the program has paid an estimated $230 billion in ERC claims, which is approximately triple the amount originally anticipated.

The pause was prompted by the significant volume of requests along with growing concerns over fraud in the program resulting from scammers aggressively marketing the credit to honest small businesses. The agency says that they are receiving nearly 50,000 new claims each week, thanks to a pop-up industry of ERC consulting firms that mislead businesses into filing inadequate claims. Currently, there are hundreds of criminal cases being investigated, with thousands more claims waiting to be audited.

What Is Next for Your ERC Claim?

Previously submitted claims will still be reviewed and paid out, however, at a much slower rate. Expected processing times will double from 90 days to 180 days, with the potential for an even longer timeline if the IRS must request additional documentation to substantiate the claim.

If you have submitted or received an ERC claim, here is what you should do next:

  • If you have previously submitted a claim, it will still be processed, but you should be prepared for much longer wait times and increased scrutiny.
  • If you have a pending claim, you are strongly encouraged to review it with a trusted tax advisor to confirm its validity and withdraw any claims that are determined to have been submitted improperly to protect yourself against potential repercussions such as fees and interest.
  • If you have previously received an ERC in error, there will be guidance forthcoming on how to repay improper claims. There is a settlement program being developed to help businesses who applied in good faith to avoid penalties. More information is expected to be forthcoming this fall.

Protect Your Business Against Fraud

In its release, the IRS emphasized its priority of protecting honest businesses and taxpayers from those seeking to take advantage. The IRS Criminal Investigation (IRS-CI) division is comprised of trained auditors working to identify instances of fraud and refer bad actors to the Justice Department for prosecution. As of July 30th, the IRS-CI had initiated 252 investigations involving potentially fraudulent Employee Retention Credit claims totaling over $2.8 billion.

The IRS has also shared a list of warning signs that businesses should watch out for to protect themselves against aggressive marketers, including unsolicited calls, large upfront fees, and preparers being unwilling to sign their names to filed returns.


Businesses are encouraged to review their claims now to avoid negative impacts, including fines and fees. IRS commissioner Danny Werfel advised seeking the guidance of reputable advisors, saying, “businesses should seek out a trusted tax professional who actually understands the complex ERC rules, not a promoter or marketer hustling to get a hefty contingency fee.”

Newburg CPA and our team of tax professionals can help you properly plan and navigate your business tax situation.  Contact us for more information.