The Employee Retention Credit & IRS Scam Alert

June 7, 2023

The ERC, sometimes called the Employee Retention Tax Credit or ERTC, is a valuable credit for businesses and tax-exempt organizations that qualified for this pandemic-related credit in 2020 and 2021.

The Internal Revenue Service (IRS) has recently shared information on the warning signs of aggressive ERC marketing and details on how promoters lure victims. Claiming the ERC improperly could result in someone having to repay the credit, along with potential penalties and interest. We don’t want this to happen to you!

Do I Qualify for the Employee Retention Tax Credit?

If you are a small business with 500 employees or less, your business may be eligible to receive up to 50% of qualifying wages paid from March 13th to December 31, 2020 and up to 70% of those paid from January 1st to June 30, 2021. This includes employers receiving a loan under the Paycheck Protection Program (PPP).

It makes sense to explore the credit if your business meets any of the following conditions:

  • Your business operation was fully or partially suspended during any calendar quarter of 2021 due to local, state, or federal requirements due to COVID-19

(or)

  • If your business endured a significant downturn in gross receipts (50% or more for the same calendar quarter in 2019) during the calendar quarter

Understanding whether you qualify and the potential repercussions of applying can confuse many. To address some basic questions, we put together a webinar last year with information that answers the following:

  • The conditions you need to meet to qualify for 2020 and/or 2021,
  • How to handle the funds received under the Paycheck Protection Program in relation to ERTC,
  • Filing an amended 941, and
  • Filing an amended annual tax return to adjust your wages line deduction.

Please follow this link to register for the webinar recording and watch it at your convenience: CTSBDC Employee Retention Tax Credit Webinar Recording (2022).

Can I Just File It Myself?

As you can probably tell from the list above, this is not something the average business owner should be doing by themselves. While it can be a great credit, it is not that simple to take all the steps involved to make sure you qualify, calculate the potential tax credit, and file the appropriate forms (including amending your tax return).

We strongly encourage you to work with a Certified Professional Accountant or CPA to ensure you follow all the proper steps. If a business offers to file this for you, and it sounds too good to be true, it may very well be a scam. The IRS and Tax Pros continue to see a high volume of aggressive broadcast advertising, direct mail solicitations, and online promotions involving the Employee Retention Credit.

If your accountant is not providing ERC services, please request a referral or contact your CTSBDC advisor for a list of reputable firms providing these services. Your payroll provider may be able to help, but remember they do not handle your annual tax filings, so they could not assist you with that portion of the process.

Check out this short YouTube video from the IRS: Don’t Fall for Employee Retention Credit Scams in English & Spanish. And learn more directly on the IRS website: www.irs.gov/erc