You have heard or seen on various media outlets that businesses are not taking advantage of the Employee Retention Credit (ERC). However, many companies offering assistance with filing for the credit are taking advantage of the public and making claims where none exists, all while collecting a hefty percentage of the claim.
The money that can be allegedly obtained seems too good for small business owners to pass up — and it most likely is.
In a press release, the IRS identified several warning signs (red flags) of aggressive ERC marketing, including:
- Unsolicited calls or advertisements mentioning an “easy application process”
- Promoter stating they can determine ERC eligibility within minutes or claiming that a business qualifies for the ERC before any discussion of your tax situation
- Large upfront fees to claim the credit,
- Fees based on a percentage of the ERC refund obtained
We applaud the IRS’ recent announcement putting an immediate moratorium on processing new ERC claims through at least the end of the year. This decision comes amid rising concerns about a flood of improper claims, putting small business owners at financial risk. You could be in a much worse position if required to repay the credit (along with penalties and interest) than if you never claimed it in the first place.
Always consult a trusted tax advisor before applying for credits or filling out any paperwork that may cost you in the long run.