Explaining the ERC with Tanner Roberson of The Romine Group

Several weeks ago, the IRS announced the details of a special withdrawal process for taxpayers who filed an Employee Retention Credit (ERC) claim.

To give some context, the IRS paused all processing of ERC claims in a historic news release in mid-September due to a flood of improper ERC claims. The main concern is these ERC marketing firms that have sprouted up are scamming business owners. These firms
mislead taxpayers through overtly aggressive marketing tactics focused on eligibility. The ERC is a highly complex tax credit with specific requirements for qualification. Business owners should always have a qualified CPA or tax attorney to determine whether they qualify for the credit.

These promoters use various methods to market their services, such as direct mailings, television commercials, emails, and social media. The ads are constant; many business owners receive them weekly, if not daily. Signs that you are dealing with an ERC promoter include:

• Charging upfront fees based on a percentage of the refund amount from the ERC claim.

Our firm has seen several examples of these ERC firms sending misleading generic eligibility questions, such as:

• “Did you practice social distancing in your office?”
• “Did you have issues obtaining products from suppliers?”
• “Did you experience a loss in revenue during the qualified period?”

Many leave out key details, such as:

• Telling business owners there will be no tax implications.
• You can’t use the same wages to calculate the ERC that were reported as payroll costs on Paycheck Protection Program (PPP) loan forgiveness applications.
• Most ERC mills file claims for all applicable quarters instead of assessing the credit eligibility at each applicable quarter as the law intends.
• Most ERC mills include major disclaimers within their service agreements, which indicate the services provided are not tax, accounting, or legal advice.
• Many of these promoters’ workforce are sales workers, and many outsource all tax work.

The IRS has about 600,000 ERC claims in the process now, and they believe most of those are ineligible claims. The IRS Commissioner emphasized they had to pause processing due to the growing evidence of questionable allegations pouring in. The IRS has already started 252 investigations involving over $2.8 Billion of potentially fraudulent ERC claims. The IRS has zeroed in on this issue, and it should be expected that a good number of these claims, processed or still in process, may be subject to an audit. ERC marketing mills need to have sufficient knowledge of the tax code. Most charge contingent fees and are incentivized to push ERC claims through. All business owners should consult with their CPA to determine eligibility for the credit.

With the announcement of the special withdrawal process, the IRS is allowing business owners to withdraw their claim if the following apply:

• You filed a Form 941-X, and the only adjustment was to claim the ERC
• You want to withdraw the entire amount of the ERC claim
• Your claim has not been processed yet, or you haven’t yet deposited the refund check

Please get in touch with us on any ERC questions so we can help get you the facts on this complicated tax credit. Various ERC promoters have put out a lot of misleading information, and discussing this with your CPA is imperative. Please feel free to call our office at 260-244-7120 regarding any potential tax questions, such as the ERC.