We have seen first-hand the benefits that tax credits bring to a business. These financial incentives can encourage diversity in the workplace, enable more funding for research & development, help businesses financially recover from natural disasters, and more. One of the most beneficial credits available to businesses today is the Employee Retention Credit (ERC). The ERC was introduced in 2020 to help businesses impacted by the COVID-19 pandemic to retain their employees. The window of eligibility to apply for the ERC for certain quarters in 2020 and 2021 is still open today, making it a valuable resource for many businesses still recovering from the pandemic. However, with increased scrutiny by the IRS, it’s especially important for businesses to choose trusted ERC providers to guide them through the process.
Aggressive ERC Providers are First on the IRS “Dirty Dozen” List
The IRS recently opened its 2023 “Dirty Dozen” list with new warnings each day about common scams taxpayers should avoid. The first day is about avoiding an aggressive ERC provider making offers too good to be true. The IRS is concerned these bad actors are taking advantage of businesses by promising large ERC refunds without properly assessing eligibility for the credit. This can lead to serious consequences for businesses claiming the credit without meeting the requirements, including penalties and interest.
Therefore, businesses must choose a trusted ERC provider who will properly evaluate eligibility for the credit, following all the guidance set forth by the IRS. A trusted advisor will also provide guidance and support throughout the application and claim process, ensuring an applicant documents all necessary supporting evidence to be audit-ready.
Choosing the Right Partner
Here are four questions businesses should ask when choosing between ERC providers:
What experience does the provider have with the ERC?
Choosing an experienced ERC provider is crucial. The provider should have a deep understanding of the ERC and the rules surrounding it. They should have worked with businesses in your industry and of your size and be able to provide examples of successful claims. Ask for references from satisfied clients to get a better sense of the provider’s expertise.
How will the provider assess my eligibility for the ERC?
It’s important for the provider to thoroughly assess your eligibility for the ERC. They should review your payroll records and financial statements to determine if you meet the requirements for the credit. They should also review your business operations and the impact of COVID-19 on your operations to determine if you qualify for the credit. [May want to include more about aggregation and income tax consequences which are issues the IRS has highlighted]
What services will the provider offer to support my ERC claim?
A trusted ERC provider will offer a range of services to support your claim. These may include assistance with completing the necessary forms, review of supporting documentation, and communication with the IRS on your behalf. They should also provide ongoing support throughout the claim process, including updates on the status of your claim.
How will the provider ensure compliance with IRS guidance?
Compliance with IRS guidance is essential when claiming the tax credit. ERC providers should have a thorough understanding of the guidance and should provide guidance on how to comply with them. They should also have processes in place to ensure that your claim is compliant and that you avoid any potential penalties or interest charges.
The Employee Retention Credit can provide significant benefits to businesses impacted by the COVID-19 pandemic. Accurately submitting your claim may come down to choosing a trusted ERC provider. By asking the right questions and choosing an experienced partner, businesses can improve their claim to be audit-ready. Don’t fall victim to aggressive promoters who promise too much. Choose a trusted advisor who will help you navigate the ERC claim process and ensure compliance with IRS guidance.