BREAKING NEWS – Corporate Transparency Act on Hold
as of Monday, March 3, 2024
On Friday March 1, 2024, the U.S. District Court for the District of Alabama declared the Corporate Transparency Act (CTA) unconstitutional. In the case of National Small Business Association v. Yellen (Case No. 5:22-cv-01448) [1], initiated by the National Small Business United, the challenge was against the CTA’s mandate for small businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).
The ruling has the effect of suspending all BOI filing requirements for now, all enforcement actions, and all compliance concerns including questions of “practicing law without a license.” Experts believe the ruling will be appealed, probably to the Supreme Court, so this is a temporary filing requirement suspension until a final appeal is exhausted. Voluntary filing appears to still be allowed if for some reason a client desires to file.
IRS Suspends Processing of New ERC Claims Due to Scams
The Employee Retention Credit (ERC) was created under the 2020 CARES Act to help small businesses keep employees on their payrolls during pandemic-related shutdowns. Unfortunately, the refundable credit has become a target of scammers, who aggressively market the program to ineligible taxpayers. To protect businesses from these predatory scams, the IRS has declared a moratorium on processing new ERC claims through at least December 31.
Instead of reviewing the complex ERC rules with taxpayers to determine whether they qualify for the credit, ERC scammers lure business owners into signing bogus applications. If the IRS issues a credit before detecting the fraud, the scammers collect high contingency fees from the business owners, who end up having to repay the credit with penalties. Many businesses have lost tens of thousands of dollars or more as a result of these schemes.
ERC-related scams are now the targets of hundreds of criminal investigations, with thousands of suspicious ERC applications flagged for audits. If you believe that your business may qualify for the ERC, you may still apply, but there is no rush due to the processing moratorium. Ignore aggressive advertising and hype, and take the time to seek advice from a trusted tax preparer.