The Pandemic Tax Credit Door Closes – What it Means for Businesses

September 22, 2023

The IRS recently announced it will stop processing new claims for the Employee Retention Tax Credit (ERTC) until at least 2024. This news will significantly impact many small businesses and nonprofits that may have been eligible for the lucrative pandemic tax credit.

Congress created the ERTC in 2020 to incentivize businesses to keep employees on payroll during the pandemic. The refundable tax credit was originally worth up to $5,000 per employee, with higher limits for 2021. However, aggressive marketing by ERTC promoters led to an onslaught of new claims, with many riddled with errors or outright fraud.

The IRS is now trying to shut down this burgeoning industry that encouraged small businesses to request the once-in-a-lifetime tax break, even if they may not have qualified. The tax agency plans to scrutinize new claims and will likely deny refunds to any business that cannot prove eligibility.

For companies with pending claims, don’t expect any payments until 2024 at the earliest. While you can still withdraw a claim, the IRS may recoup refunds already issued if it finds you should not have qualified. Our advice is to consult one of our pros to review your business operations and government orders in 2020/2021 to determine potential ERTC eligibility. Proper documentation will be critical if the IRS decides to audit your credit claim down the road.

The ERTC ship has likely sailed for most, but some businesses may still qualify retroactively. If you are eligible, filing quickly is essential before the IRS door shuts completely. As always, our tax team is here to help you navigate this complex credit and recent IRS changes. Please let us know if you have any questions.

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