Beware of Those Bearing ERC Gifts

Clifton Larson Allen released an article asking businesses to be weary of those that might reach out soliciting to process your Employee Retention Credit claims. If it sounds too good to be true, it probably is. ERC consultant firms are incentivized to take risky positions regarding the credit, as the guidance issued isn’t overly clear, and the firms generally take a percentage of the credit obtained as their fee.

The most ambiguous qualifier of the ERC is supply chain disruption, which nearly everyone experienced in 2020 and 2021, but was it enough to qualify for the credit, and can all the facts and circumstances required be documented? Keep in mind that by allowing an email or cold call consultant to process your claim, you will allow them to view your financial data and employee information. When evaluating whether to claim, make sure you are dealing with a familiar and reputable firm.

“The Treasury Inspector General for Tax Administration issued a report on August 31 that indicated the IRS has identified 11,096 suspicious claims that resulted in more than $2 trillion in credit claims. ERC fraud is definitely on the IRS’ radar. The American Rescue Plan Act of 2021 extended the statute of limitations for the ERC from the normal three years to five years, thereby giving the IRS more time to process, evaluate, and audit claims.”

To view the full article on the CLA website, click here.

To view the COVID Tax Tip on the IRS website on the issue of third parties promoting ERC claims, click here.

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