IRS issues a moratorium on new Employee Retention Credit processing

Your Better Business Bureau and the IRS warned companies earlier this year about scams revolving around the Employee Retention Credit, a tax credit for businesses that continued paying employees during the COVID-19 shutdowns or had a significant income decline during the eligibility period.

Now, the IRS is ordering a stop to new Employee Retention Credit processing after a surge in questionable claims, concerns from tax professionals and aggressive marketing to ineligible applicants.

The moratorium lasts through at least the end of 2023 on processing new claims for the program to protect small business owners from scams.

Payouts for claims already filed will continue during the moratorium period but at a slower pace because of the detailed reviews, the IRS said. Existing claims will go from a standard processing goal of 90 days to 180 days — and much longer if the claim faces further review or audit. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.

Ultimately, the IRS will hold you responsible for any inaccurate information on your tax return – not the scammer. BBB has tips to help business owners spot a scam:

— Don’t believe marketing materials that guarantee you’ll qualify for a tax credit. Anyone who makes guarantees without knowing anything about your business is likely up to no good.

— Think twice about promises of huge refunds. Scammers use the same tactics for many different cons. Tax credit schemes are no exception. Scammers count on an emotional response to a promise of fast, free cash before reason sets in. If it sounds too good to be true, it probably is.

— Don’t pay to get money. While paying a tax professional to prepare your taxes each year is perfectly reasonable, watch out for companies or individuals that charge you fees based on high and optimistic percentages of recovered taxes. Keep in mind that true tax professionals always make conservative estimates.

— Get to know the rules about the Employee Retention Credit or other tax credits. Always do your research through a reputable source. For example, a quick visit to IRS.gov reveals that employers eligible for the Employee Retention Credit must have sustained a full or partial suspension of operations due to a governmental order by an appropriate authority, and they need to have qualified as a recovery startup business for the third or fourth quarters of 2021, among other qualifications. A little research can debunk scammers’ claims before you get sucked into their schemes.

— Be careful with your personally identifiable information. Never give sensitive information to someone you don’t know and trust. If you are dealing with a tax professional for the first time, investigate beforehand to find out if they have a solid business reputation before you hand over any personal details.

— Always look for businesses that follow BBB Accreditation Standards and BBB Standards for Trust. Trustworthy BBB Accredited Businesses don’t participate in shady practices.

Find more helpful advice at the BBB Tax Tips & Resources page. Businesses can also review the BBB Business Tip: Getting your business ready for tax season and visit BBB’s BizHQ to keep up on our latest tips and information.

Shred Day is Oct. 7

A great, proactive approach to securing your identity is to safely destroy and dispose of unneeded documents and hard drives that contain your personally identifiable information. BBB is here to help with our fall “Shred Day.” This event is designed exclusively for individuals and families.

BBB is holding this free, bi-annual event in partnership with the Chattanooga Times Free Press, River City Shredding, Resource 1 Tier 3 Data Security, Coca-Cola Bottling Company and the Hamilton County Coalition from 9 a.m. to noon (Shredding will end earlier if trucks fill up.) on Oct. 7. This event is designed exclusively for individuals and families.

The event will be in the Coca-Cola Bottling Company’s parking lot at 2111 W. Shepherd Road in Chattanooga, which is located just off Exit 1A (Airport exit) from Highway 153.

This is also a wonderful opportunity for residents to have electronics recycled and outdated or unneeded prescription drugs dropped off for safe disposal. Please limit documents to three large trash bags of documents per person and limit hard drives to 4 per person.

For more information, please visit bbb.org/Chattanooga or call the BBB at 423-266-6144.

Michele Mason is president of the Better Business Bureau in Chattanooga.