In recent months, we have seen in increase in bad or inadequate actors soliciting work related to the Employee Retention Credit. Due to the lack of IRS guidance on the subject, some are taking a very liberal interpretation or acting in a fraudulent manner.
In March 2020, Congress passed the Employee Retention Credit (ERC) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, relief designed to encourage businesses to retain employees. For those businesses "significantly impacted by COVID-19," the ERC is fully refundable against payroll taxes, meaning you can get a refund in excess of your payroll tax payment. Businesses have until 2024 to retroactively claim the credit by filing an amended tax return. (For more information, read our previous blog post here.)
Because the ERC rules and structure were adjusted from bill to bill, its changes have created an inconsistent understanding of eligibility. With the extension of the credit, we have seen inexperienced ERC service providers and payroll processors looking to profit from this credit by offering clients help with the credit. Many of these ERC providers have not dealt with the IRS in compliance or audit representation matters and do not seek nor understand the full details regarding the credit’s requirements.
Pay specific attention to those willing to recalculate the ERC in exchange for a percentage of your refund. These organizations may claim the IRS guidance is “incorrect” and try to push for aggressive positions without their clients’ understanding or consent.
We strongly encourage you to work only with a trusted specialty tax advisor on the ERC. If you need assistance in applying for the credit, look for established firms who have experience in dealing with other complicated tax laws, including R&D Tax Credits and Cost Segregation.