The Internal Revenue Service (IRS) is investigating and targeting those who took inappropriate advantage of COVID-19 relief programs. If you filed a questionable Employee Retention Credit (ERC) claim, the deadline for disclosure by small businesses is coming up fast.
The IRS is advising businesses who filed a claim to be sure their claim was legit. Said IRS Commissioner Danny Werfel, “Many businesses were wildly misled about the qualifications, and the IRS is taking a special step to highlight common problems being seen about these claims. The IRS urges ERC claimants to get with a trusted tax professional and review their qualifications before time runs out on IRS disclosure and withdrawal programs. The ‘suspicious seven’ signs released today are clear red flags that ERC claimants should carefully review.”
The deadline for the IRS Voluntary Disclosure program is March 22, 2024. The program is set up to assist those who either mistakenly—or purposefully—filed a claim for an ERC credit. The expiring program allows beneficiaries of ERC payments to repay 80 percent of their claim, rather than the full sum that they already received. The IRS urges those who filed an as-yet unpaid claim to review the validity of their claim and withdraw the claim if they find concerns.
The IRS is highlighting red flags of a potentially ineligible or fraudulent ERC claim. These include:
- Claims that are based on supply chain disruptions, which alone, does not qualify a business for an ERC claim.
- Businesses that claim credits for all possible quarters—rather than those for which they are eligible. By the same token, businesses can only claim wages paid during the time when their business was suspended not the entire calendar quarter.
- Businesses that did not exist, or did not employ workers during the time period for which they are claiming eligibility for an ERC claim are advised to consider withdrawing the claim or reimbursing proceeds to the IRS.
- Incorrect calculations regarding wages and workers paid could lead to an expensive audit and potential penalties if your claim is incorrect.
- Companies that relied on a marketing company to file their ERC claim simply because the program is available have placed themselves in line for an audit, penalties, interest, and other expenses if the IRS determines their claim is not legitimate.
The ERC offered support to businesses as they struggled to survive during the pandemic. If your company wrongfully or mistakenly took advantage of the program—work with a tax professional to correct the situation on your behalf.
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Serving local and international clients, the legal group at Robert J. Fedor, Esq., LLC delivers experienced representation to individuals and business regarding compliance issues, tax litigation, and offshore tax concerns. Call 800-579-0997 or contact us online today.
