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Business Beware: IRS Warns of ERC Promoters
The Employee Retention Credit (ERC) was introduced in the spring of 2020 as a way to aid businesses and help them maintain their workforce during the pandemic. This credit was designed to help those companies who were directly impacted by the pandemic either through:
- a forced (partial or full) government ordered shutdown;
- supply chain issues; or
- significant revenue reductions.
While the IRS has issued guidelines on how to qualify, there are several pop-up ERC companies promising credits to those that likely do not qualify. These companies are aggressively reaching out and filing incomplete, and oftentimes, unqualified claims while taking a percentage of the credits received. The IRS recently issued a warning in regards to these pop-up companies, which can be viewed here: IRS opens 2023 Dirty Dozen with warning about Employee Retention Credit claims; increased scrutiny follows aggressive promoters making offers too good to be true | Internal Revenue Service.
Remember, if it sounds too good to be true- it probably is. The ERC is a valuable credit to many businesses who were severely impacted by the pandemic. Check with your tax professional (someone who is familiar with the ins and outs of your business) to help determine your eligibility, including the documentation around that and calculating the credit itself.
Improper claims could result in taxpayers being required to repay the credit along with penalties and interest. Ultimately, no matter what these companies promise, the validity of the claim and burden of proof of eligibility falls on the business owner.
This information does not constitute legal advice.