What’s Happened:

The dining industry has faced unique challenges during the pandemic, with many restaurant owners relying on relief measures such as the Employee Retention Credit (ERC). However, recent developments may affect your restaurant’s ability to claim this credit. As of last Thursday, the IRS paused processing new ERC claims due to an increase in fraud and scams related to the program. IRS Commissioner Danny Werfel voiced concerns about genuine businesses like yours being deceived. He noted, “As we distance ourselves from the pandemic, the misuse of this well-intended program has become painfully evident.”

The ERC was initially established to assist businesses and tax-exempt organizations during trying times. However, some firms lured by the prospect of refundable tax credits, have misled businesses, especially those not entirely familiar with the intricacies, like many in the restaurant sector. A key point of contention: many of these firms promise hefty refunds but omit crucial information about wage deduction adjustments and specific ERC guidelines.

What Restaurant Owners Need to Know:

  • The suspension on new ERC claims remains in place until at least Dec. 31, 2023.
  • The IRS is continuing its review of 600,000 previously filed ERC claims.
  • Payments on prior claims may still proceed but be prepared to provide additional supporting documents for your restaurant’s claims.
  • ERC claims may now take longer to process, possibly beyond 180 days, especially if an audit is initiated.
  • Increased scrutiny means anticipated delays in processing and an uptick in audits and investigations, primarily targeting dubious promoters and businesses.
  • Incorrect or fraudulent claims will require repayment, along with potential penalties, putting restaurants at financial risk.

What Restaurant Owners Should Do Next:

Navigating the tax landscape requires expertise, especially in the nuanced world of the restaurant industry. Avoid falling for offers that sound too good to be true. Instead, seek guidance from trusted professionals. WVC RubixCloud’s parent company, William Vaughan Company, a certified public accounting firm is available to provide clarity and insights for restaurant owners concerned about their ERC submissions.

The IRS also has dedicated resources, including an updated FAQ section, to protect businesses from scams or undue pressures to file incorrect claims. Additionally, a settlement program will be unveiled this fall, helping manage the repayment of certain questionable ERC claims. For an in-depth look, visit the official IRS ERC website.


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Kristin Metzger, CPA

Restaurant Practice Lead

William Vaughan Company