IRS Warns Employers to Beware of Third Parties Promoting Improper Employee Retention Credit Claims
The Employee Retention Credit (ERC) was meant to encourage employers to keep employees on their payrolls during the COVID-19 pandemic. Now the IRS is warning businesses about fraudulent schemes and promotions relating to the ERC.
What would you do if I told you that we can guarantee your business a refundable tax credit worth $26,000 per employee with asking very few if any questions, never looking at your books? Hopefully, run away?
Unfortunately, many small businesses are entertaining conversations eager to hear how much of a credit they may be eligible for. Many have now been convinced to claim the ERC, even if they may not qualify for the credit.
ERC Mills – What to watch for:
- Unwanted solicitations making unreasonable promises without having access to payroll or financial information.
- ERC refunds that exceed payroll amounts.
- Eligibility determinations that have not taken into account affiliated or commonly controlled entities or the relationship of employees and owners.
- Any fee based on the percentage of credit received. Some can be as high as 40% of the credit. Others offer a discount if paid before you actually receive your refund from the IRS.
- Language in engagement letters that disclaim that the provider is not providing tax advice.
- Other language or promises that the fees would be repaid if you do not qualify for the credit upon audit.
If you feel that you may have already been pulled into a potentially fraudulent scheme you need to contact your trusted advisor immediately as you may need to file corrected tax returns.