10/26/2022
EMPLOYERS WARNED TO BEWARE OF THIRD PARTIES PROMOTING IMPROPER EMPLOYEE RETENTION CREDIT CLAIMS
Please click here for a PDF copy of this article: Employers Warned to Beware of Third Parties Promoting Improper ERC Claims
This month, the Internal Revenue Service (IRS) issued a warning to employers to be wary of third parties who may advise them to claim the Employee Retention Credit (ERC) when they may not qualify.
They also warned that improperly claiming the ERC could result in required repayment of the credit plus penalties and interest.
ARE THERE ANY RED FLAGS TO LOOK FOR?
“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' federal income tax return must be reduced by the amount of the credit,” the IRS said. The IRS also encouraged businesses to be cautious of “advertised schemes and direct solicitations promising tax savings that are too good to be true.”
WHAT IS THE ERC?
As a reminder, the ERC is a refundable tax credit for businesses that continued paying employees while partially or fully shutdown due to COVID-19 or that had significant declines in gross receipts from March 13, 2020 to December 31, 2021 (note: only those classified as recovery startup businesses are eligible for the ERC in the 4th quarter of 2021). The ERC was meant to encourage employers to keep employees on their payroll during the pandemic.
COULD I STILL, IN FACT, BE ELIGIBLE FOR THE ERC?
If they have not already, businesses have until 2024 to claim the ERC retroactively by looking back on their payroll during that time period. However, as an additional reminder, for any quarter during the window, eligible employers cannot claim the ERC on wages that were reported as payroll costs in obtaining Paycheck Protection Program (PPP) loan forgiveness or that were used to claim certain other tax credits.
FOR MORE INFORMATION
For more information or assistance, please contact our Payroll team at 210–293–6620, toll-free at 1–888–757–2104, or [email protected].