(The Center Square) – Small businesses are crying foul after the Internal Revenue Service announced it would delay processing of a key tax credit, the latest in a series of delays for the agency.

The IRS announced it will significantly slow its processing of Employee Retention Tax credits that have already been filed and not accept any new claims of this kind until next year. The agency says a flood of fraudulent attempts means it will have to take extra care to avoid fraud.

The tax credit was meant to help businesses and nonprofits hold on to employees during the pandemic. Now, Small businesses say the IRS moving slowly means they will pay the price.

"The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in," IRS Commissioner Danny Werfel said in a statement. "The further we get from the pandemic, the further we see the good intentions of this important program abused. The continued aggressive marketing of these schemes is harming well-meaning businesses and delaying the payment of legitimate claims, which makes it harder to run the rest of the tax system. This harms all taxpayers, not just ERC applicants."

The National Federation of Independent Business, a leading small business group, blasted the IRS after the announcement,

“While misleading marketing for the Employee Retention Tax Credit remains a problem, the IRS should not penalize the hundreds of thousands of small businesses that have followed the eligibility rules, correctly filed claims, and need help now,” Kevin Kuhlman, NFIB Vice President of Federal Government Relations, said in a statement. “NFIB has heard from many small business owners who are frustrated by the delays in processing claims and lack of communication from the IRS."

A recent NFIB survey found that small businesses are already hurting, in large part because of rising inflation. According to federal data, inflation spiked in August well beyond expectations.

The NFIB poll of small business owners found that they cite inflation as their number one business concern, more than the labor shortage or anything else.

Pandemic-era fraud led to hundreds of billions of dollars being taken from taxpayers across several government programs. Werfel, citing this kind of concern, seemed to suggest that processing could be delayed even further if needed to avoid fraud.

"For those people being pressured by promoters to apply for the Employee Retention Credit, I urge them to immediately pause and review their situation while we look to add new protections and safeguards to stop bad claims from ever coming in," Werfel said. "In the meantime, businesses should seek out a trusted tax professional who actually understands the complex ERC rules, not a promoter or marketer hustling to get a hefty contingency fee. Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution. The moratorium will help protect taxpayers by adding a new safety net onto this program to focus on fraudulent claims and scammers taking advantage of honest taxpayers."

Kuhlman said the IRS delay will only make things harder on small businesses.

“By further delaying the processing of existing claims, the IRS is making it more difficult for small businesses to operate, keep employees, and create jobs," Kuhlman said.