IRS | ERTC | ERC

The IRS issued a recent press release announcing Seven Warning Signs a business’ Employee Retention Tax Credit (ERC or ERTC) may be incorrect or even fraudulent.  Businesses that filed incorrect or fraudulent ERC or ERTC claims may not only have to pay back the refunds they received but may also be liable to pay interest and penalties.

The IRS has recently announced it would step up its enforcement of erroneous or fraudulent ERC claims.  According to the IRS, the seven signs of incorrect or fraudulent ERC claim are: 

1. Claiming too many quarters;
2. Basing claims on government orders that did not qualify under the program;
3. Reporting too many employees and/or using incorrect calculations;
4. Citing supply chain issues;
5. Businesses that applied without actually paying any qualified wages;
6. Businesses which did not exist during the eligibility period; and/or,
7. Those who relied upon aggressive ERTC promoters who told business owners to apply for relief as “there is nothing to lose.”

The ERC program was intended to provide much needed relief to businesses affected by the COVID-19 pandemic. While the program provided relief to many businesses entitled to the financial relief, the program seemingly invited aggressive amounts of fraud and abuse. The IRS seems particularly concerned with ERC promoters or “ERC mills” that filed unduly aggressive or even fraudulent ERC claims for businesses.

If your business filed an ERC claim that was not accurate, there is potential for relief. The IRS has a created a voluntary disclosure program which allows eligible businesses to come forward and withdraw their claims.  In exchange for participating in the program, businesses participating in the program will get a 20% reduction in the ERC benefit due and avoid penalties and interest. The deadline to apply for the voluntary disclosure program is March 22, 2024. Businesses wishing to take advantage of the voluntary disclosure program must act quickly.

RJS LAW helps businesses and individuals with a variety of tax issues including all aspects of Employee Retention Tax Credits. If you believe your business may have submitted an incorrect ERTC claim the time to act is NOW. For a free consultation, please contact RJS LAW on the web or at 619-595-1655 for a free consultation as soon as possible.

Written by Joseph Cole, Esq., LL.M.