In today’s climate, the Employee Retention Credit (ERC), a refundable tax credit from the Internal Revenue Service (IRS), stands as a valuable resource for businesses and a financial lifeline for many. However, the ERC has become a subject of persistent scrutiny due to the prevalence of fraudulent claims and service providers that use aggressive and predatory tactics (so-called “ERC mills”).
On September 14, 2023, the IRS made a significant announcement, introducing a temporary moratorium, or halt, on the review of ERC claims submitted on or after that date. This moratorium will remain in effect until at least January 2024, with claims submitted before September 14, 2023, continuing to process, albeit at a slower pace. This move by the IRS aims to bolster protective measures, curtail potential abuse, and shield well-intentioned business owners from predatory ERC mills.
The ERC legislation includes complex rules on entity aggregation, PPP/ERC interaction, full-time employee count, gross receipts declines, and whether your business was affected by governmental orders – all of which require the review of an experienced professional. Given the complex nature of the eligibility tests and exercises required, many businesses may have filed erroneous claims. The ramifications of filing an erroneous ERC claim, whether knowingly or unknowingly, can be both punitive and formidable. These consequences may include the obligation to repay the credit (potentially along with interest charges and penalties,) and, in some cases, criminal liability for fraudulent tax positions.
If you think that you have worked with an ERC mill or an inexperienced provider, you should consider having an ERC expert take a second look at your claim.
Based on what the experts at EZ-ERC have seen, there are several areas where unknowing taxpayers can be subject to the pitfalls of a bad advisor, or file improper claims, noted below:
Unfortunately, the ERC space has witnessed significant misuse in the above areas. Nevertheless, ERC auditors are grappling with the nuances of these newly emerging regulations, making it challenging to predict the precise parameters of enforcement.
Fortunately, the IRS has announced forthcoming initiatives to aid victims of unscrupulous and unqualified ERC mills through an amnesty program. This program will enable affected parties to rectify inappropriate claims or repay ERC funds they should not have received.
Whether you need a qualified advisor to confirm that your ERC claim was well-substantiated or defend against an ERC audit, the guidance of seasoned professionals, namely CPAs and tax attorneys, is essential. To that end, the team of experts at EZ-ERC is available to:
At EZ-ERC, we take pride in offering comprehensive “Second Look” and Audit Defense services. Our confidence stems from our deep understanding of the tax code and ERC legislation. We encourage you to reach out to one of our advisors today to explore how we can assist you or your clients in a current or potential ERC audit or through a review of previously filed claims to ensure the eligibility analysis and ERC calculation were performed accurately.
EZ-ERC distinguishes itself as a firm operated and managed by licensed, credentialed, and highly experienced tax professionals and attorneys. Our experts are deeply involved in every client engagement, from inception to filing, and beyond. With decades of practical experience in tax advisory and accounting, our professionals are integral to every aspect of our client interactions. Quality and integrity remain at the core of our approach, ensuring that our clients receive the highest standards of service.