The Internal Revenue Service announced last week that it will not process new Employee Retention Tax Credit (ERTC) applications until at least 2024 because of the recent proliferation of ERTC scams. This means that nonprofits that were eligible for the ERTC for 2020 or 2021 and have not yet filed for the tax credit will need to wait until at least early 2024 for the IRS to process their applications. Nonprofits that have pending ERTC applications should expect delays during the moratorium period, because the IRS is processing existing claims at a much slower pace than usual.

The IRS also issued new guidance and tools for helping determine ERC eligibility, including frequently asked questions and a new question and answer guide to help nonprofits and businesses better understand if they meet the qualifying standards for the ERTC.

In addition, the IRS is developing a settlement program for repayments for those who received an improper ERC payment due to the proliferation of scammers. More details will be provided this fall.

Lastly, the IRS is finalizing details that will be available soon for a special withdrawal option for those who have filed an ERC claim but the claim has not been processed. This option – which can be used by taxpayers whose claim hasn't yet been paid– will allow the taxpayers, many of them small businesses and nonprofits who were misled by promoters, to avoid possible repayment issues and paying promoters contingency fees.