ERC shops - the IRS is coming

$2 trillion

Of potentially fraudulently claimed Employee Retention Credits.

The IRS is coming for tax fraudsters.

Backstory:

The CARES Act of March 2020 included a generous federal payroll tax credit - the Employee Retention Credit (”ERC”) - for businesses meeting specific criteria. The purpose of the credit was to provide quick cash flow for businesses to continue making payroll through shutdowns and declining revenues.

Then - and into 2021 as the credit continued - millions of business owners + their accounting & tax advisors scrambled to understand the ERC rules, prepare & submit required paperwork, and wait for credit-related funding to arrive from the IRS.

Currently:

Many, if not most, businesses who qualified for the ERC have already applied for it. Despite this, we have seen a rise in so-called “ERC mills” - companies who approach business owners with aggressive and misleading marketing tactics like the one in this post’s picture.

Does the picture look familiar? It looks an awful lot like an IRS 1099-type form. But it isn’t. A colleague shared this after receiving it in the mail with a name, phone number, and a website for a company claiming she might qualify for nearly $500,000 in Employee Retention Credit. She qualifies for no such thing.

Using marketing materials that resemble IRS forms is one strategy to entice uninformed business owners. Other strategies include calculating the credit incorrectly, submitting credit requests to the IRS for businesses that don’t actually meet credit criteria, and charging business owners well-above-market rates for related paperwork.

What you can do:

Make no mistake. Some of these ERC mills are committing federal tax fraud. They are submitting credit requests to the IRS using inflated figures or in cases where a business doesn’t qualify for the credit at all. Rumor has it that the IRS has been test piloting investigating these mills over the summer and is about to ramp up enforcement in this area. The ERC mills will dwindle under severe IRS scrutiny; don’t go down with them.

If you believe your business is entitled to tax refunds related to the Employee Retention Credit that you have not yet claimed, please ask your accounting and tax advisors. Or DM me. I do not do this work myself, but I can connect you with reputable colleagues who do.

Whatever you do, please don’t trust a fly-by-night shop that says you are “guaranteed”, “automatically approved” or anything along those lines.