Compliance risk for people and businesses claiming Employee Retention Tax Credit improperly

The Internal Revenue Service (IRS) has issued a renewed cautionary advisory, urging individuals to thoroughly review the guidelines for the Employee Retention Credit (ERC) before attempting to claim it, as unauthorized promoters persist in encouraging ineligible individuals to file.

Reports from the IRS and tax professionals indicate ongoing aggressive promotion of ERC schemes through mediums like radio and online. These promoters often charge substantial upfront fees or fees contingent upon the refund amount. Furthermore, they may neglect to inform taxpayers that wage deductions claimed on their business’s federal income tax return must be reduced by the amount of the ERC.

Despite prior warnings dating back to last fall, attempts to improperly claim the ERC persist into the 2023 tax filing season. Tax professionals report continuing pressure from individuals seeking to claim these credits erroneously. In response, the IRS Office of Professional Responsibility is preparing additional guidance for the tax professional community, which will be released soon.

Businesses should always be cautious of advertised schemes and direct solicitations promising tax savings that are too good to be true. If you have any questions about claiming a business tax credit, contact a ShindelRock tax professional.