Employee Retention Credit (ERC) Claims

The ERC is another CARES act program that was attempting to help during the heart of the COVID pandemic, the credit was signed into law in March 2020.  The ERC is a refundable tax credit designed for businesses that continued paying employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020, to December 31, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period within those dates.

To be eligible for the ERC, employers must have had a full or partial shutdown due to a government order due to COVID-19, or a significant decline in gross revenues for a calendar quarter between March 13, 2020 – June 30, 2021 (Recovery startup businesses, which are businesses that started after February 15, 2020, with gross revenue under 1 million, can qualify through December 31, 2021).  To qualify, your gross revenues for 2020 would need to be less than 50% of the same quarter in 2019.  In 2021 your gross revenues would need to be less than 80% of the same quarter in 2019 with the added option of comparing to the prior calendar quarter. For more information from the IRS website, click here.

During 2020 we pushed out information regarding the ERC and we assisted many clients in the process – but today we want to talk about perceived fraud related to ERC.  Many of our clients have been contacted by tax credit firms offering to help apply for the ERC.  Many of those firms are using fraudulent or at least improper interpretations of the law. Congress and the IRS perceive that there has been large-scale fraud by those tax credit firms, and the IRS has launched a massive audit initiative to stem the perceived fraud.

These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund and may not inform taxpayers that wage deductions claimed on the business’s federal income tax return must be reduced by the amount of the credit.

Businesses are encouraged to be cautious of advertised schemes and direct solicitations promising large tax credits. Taxpayers are always responsible for the information reported on their tax returns. Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.

If you feel that you have filed for an ERC credit that may be questionable, we can verify the eligibility and file an amendment if necessary. We are also able to help file for the credit if you feel that you may qualify – give us a call today!