Overblown claims about employee retention credit (ERC) eligibility are costing employers and drawing alarm from the Internal Revenue Service.
In a warning posted online, the IRS cited growing reports of third parties who advised employers to claim the ERC even though they did not qualify. In return, the advisors charged a significant upfront fee or a fee contingent on the refund amount.
Employers often were not told about requirements related to the ERC or that the ERC amount must be reflected in the wage deduction total of the employer’s federal income tax return.
The ERC is a tax credit established in 2020 for businesses that experienced an eligible decline in gross receipts or government shut down during the COVID-19 pandemic but continued to pay employees. The credit expired during the second half of 2021.
Improperly claiming the ERC can be costly, and employers can be required to repay the credit with additional interest and penalties. If a business has filed a return that incorrectly claimed the ERC, it can file an amended return to correct the issue.
The ERC is one of several credits that could have lingering impacts on your tax returns and tax strategy in 2023. Reach out to a member of our tax services team or entrepreneurial services group for help.
© 2022 KraftCPAs PLLC
KraftCPAs can help.
Call us at 615-242-7351 or complete the form below to connect with an advisor.