The IRS warned small business owners about these unscrupulous ERC "companies" in October of 2022 & again this March. These warnings included a reminder that the taxpayer is the one who will be ultimately responsible for any erroneous ERC claims, not the third party that filed the claim.
Congress created The Employee Retention Tax Credit (ERC) in response to COVID. With billions in refundable tax credits on the line, it was only a matter of time before unreputable companies came out of the woodwork to stake their claim. Many of our clients have wisely contacted us regarding the ERC ads. We know that most small business owners are inundated with flyers and phone calls claiming they are missing out on tens of thousands of dollars.
Per the IRS,
Third-party promoters of the ERC often don't accurately explain eligibility for and computation of the credit. They may make broad arguments suggesting that all employers are eligible without evaluating an employer's individual circumstances. For example, only recovery startup businesses are eligible for the ERC in the fourth quarter of 2021, but these third-party promoters fail to explain this limitation. In addition, some third parties do not inform employers that they cannot claim the ERC on wages that were reported as payroll costs in obtaining Paycheck Protection Program loan forgiveness.
Additionally, some of these advertisements exist solely to collect the taxpayer's personally identifiable information in exchange for false promises. The scammers then use the information to conduct identity theft (IRS, 2023).
Businesses are encouraged to be cautious of advertised schemes and direct solicitations promising tax savings that are too good to be true. 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 (IRS, 2022).
The bottom line is that the ERC is a complex & complicated credit. So, consider the source the next time someone tells you that you qualify for additional ERC funds. Are they licensed CPAs? Do they have access to your gross receipts, year over year and quarter over quarter? If not, how would they even know if you qualify? Odds are, they don't! If you have questions or concerns about your ERC eligibility, talk to us & we can walk you through your actual set of facts.
References