IRS Announcement re: ERC Processing Pause
Last Thursday, September 14, 2023, the IRS issued an announcement that it was pausing processing new employee retention credit claims through year-end so it could put in place measures to better detect fraudulent claims, amidst a continued influx the last few months. See a brief summary of the release here.
How will this impact your nonprofit?
- Claimed and Collected: If you previously consulted with a qualified tax advisor, claimed ERC, and received full payment from the IRS, this announcement should have minimal impact on you. You are still subject to selection for audit, but we don’t yet know if or how this will impact audit approach, volumes, etc. If you did not utilize a qualified tax advisor, you may want to consult with a trusted tax professional to review that the gross receipts calculations were correctly completed, timing of donations and other revenue streams was appropriately considered by quarter, grant funding for payroll was properly considered, or that the partial suspension documentation and related impact arguments are supportable.
- Claimed and awaiting payment: If you submitted your 941-X(s) prior to September 14, 2023, you remain in the processing queue, and the IRS indicated that they are continuing to process these claims. We have often seen processing take 12+ months, so this announcement could add more time. The IRS also referenced potential for gathering more information before processing credits, so you may be contacted to provide information about eligibility or calculations prior to receiving payment. Once again, if you did not consult with a qualified tax advisor prior to filing your claim, you may want to revisit your eligibility and wait for instructions should you choose to correct any errors.
- Ready to sign and send in your 941-X: If you have your credits complete and were just ready to get to the post office to mail them in, this announcement means a likely delay in processing, but we still recommend you send in your 941-X now to get in the queue. If you did not use a qualified tax professional to assist you with your claim, please consult with your trusted advisor prior to submitting.
- Still working on your credits: If you are still in the process of determining if you are eligible, calculating credit amounts, or preparing your 941-X, you may continue doing so and submit your claims by the stated deadlines, knowing they will not be evaluated until after January and payments may be delayed. The IRS has emphasized that you should be sure you are working with a reputable provider and have documentation to support eligibility and credit calculations prior to filing.
Timing
As a reminder, the first deadline for submitting claims for employee retention credits is April 15, 2024 for any credits claimed for periods in calendar 2020. For 2021 credits, the deadline remains April 15, 2025. That said, continuing to work through your credits with a qualified tax professional now will help you be prepared if the IRS announces more information, change in processes or required documentation, etc. to avoid a scramble in April.
How we can help
CLA has a team of dedicated nonprofit professionals helping clients evaluate eligibility (including tie-outs to those tricky gross receipts totals on your 990 – an important step!), calculate credits (navigating restricted funding and PPP), and preparing 941X to claim credits. We have also helped a number of clients selected for IRS audit of ERC navigate that process. We would love to help your organization too. Please reach out for a 30 min. complimentary consult here.
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