By Matthew R. Staul, EA, MBA
The IRS has stopped processing Employee Retention Credit applications for the year due to widespread fraudulent claims across the country. Many companies hire promoters to advertise that just about all businesses can qualify for the Employee Retention Credit based on their interpretation of the guidelines originally set by the IRS. The problem is that if you did not have a significant reduction in receipts during the shutdown period, it is likely that your business did not qualify for the credit. Many companies advertising for Employee Retention Credit filing charge a specific percentage of the total figure of the refund for their fee, which is why they are playing fast and loose with the rules. The IRS has cracked down on these companies, and they have ramped up audits for the businesses that have received the credit. If you have already filed a claim for your business and have not received the refund, contact your tax advisor to determine if they believe that all eligible requirements have been met. If there is any doubt that the claim could be improper, you can still rescind the application if the funds have not been deposited. If you have already received the funds but you believe the claim was improper, the IRS is planning to announce a settlement program in the coming months to let the business owners repay the money without any penalties attached.
Know the warning signs of aggressive ERC marketing (IRS.gov):
• Unsolicited ads, calls, emails or texts from someone you don’t know.
• Statements that the promoter or company can determine your ERC eligibility within minutes.
• Large upfront fees to claim the credit.
• Fees based on a percentage of the refund amount of Employee Retention Credit claimed – you should always avoid a tax preparer basing their fee on the refund amount.
• Statements from the promoter that you qualify for the credit before discussing your tax situation.
• Statements from the promoter urging you to submit the claim because there is nothing to lose. In reality, those improperly receiving the credit could have to repay the credit – along with substantial interest and penalties.
Matthew R. Staul is an enrolled agent with the Medical Management Consulting Group, Inc., a full-service consulting and accounting firm based in Virginia Beach. mmcgonline.com