The IRS recently announced an immediate stop to processing new claims for the Employee Retention Credit. The ERTC is a refundable tax credit designed for businesses that continued to pay their employees despite Covid-19 closures or that had a significant decline in gross receipts during eligible periods, primarily 2020 and 2021.
Many of us have heard commercials, received a fax or email and even a phone call promising exorbitant refunds on ERTC claims from insistent marketers, all willing to file on your behalf and take a percentage up front of their promised return.
Despite numerous warnings by the IRS about these ERTC promoters, ERTC claims continued to be prepared by these aggressive self-proclaimed tax-experts and are the direct reason the IRS has taken this drastic step of stopping the processing of new ERTC claims.
If you filed before the moratorium, the IRS says they will continue to process returns, but it will take longer. All ERTC filings will be subject to higher audit scrutiny than a normal payroll filing.
Those caught filing erroneous claims will have to return the funds received with penalties up to 25% and interest on the funds received. Also remember, an ERTC credit is taxable, amendments will be needed for both your practice entity and personal returns if you’ve filed an ERTC claim after your tax return was filed.
We’ve warned our clients about these aggressive ERTC firms and higher audit risk on potentially fraudulent filings and claims; many of our clients have heeded our warnings. Now the IRS is supporting these warnings and putting all taxpayers on notice.
Reach out to us if you have any questions.