IRS warns Employers to be aware of third parties promoting improper Employee Retention Credit claims.

WASHINGTON — The Internal Revenue Service warned employers to be wary of third parties who are advising them to claim the Employee Retention Credit (ERC) when they may not qualify. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit.

These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund and may not inform taxpayers that wage deductions claimed on the business’ federal income tax return must be reduced by the amount of the credit.

If the business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credit, the business should file an amended income tax return to correct any overstated wage deduction.

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By now, just about everyone has heard of PPP loans, EIDL Loans, and the various grants available to employers that have been negatively impacted by COVID-19. However, there is another COVID relief program that many people don’t know about called the Employee Retention Tax Credit (ERC). It’s largely unknown because when it was first rolled out it didn’t apply to a lot of people (you couldn’t claim the credit if you got a PPP loan), but the rules have since changed. Under the new ERC rules, many businesses that were impacted by COVID are entitled to tens, or even hundreds of thousands of dollars in COVID relief funds – over and above any PPP or EIDL loans they might have already received.

So how does the Employee Retention Tax Credit work??

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