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IRS Suggests Businesses Use Pause on Processing ERC Claims as Opportunity to Consult Qualified Tax Pros

S.J. Steinhardt
Published Date:
Sep 22, 2023

The IRS's recently announced moratorium on processing Employee Retention Credit (ERC) claims has also prompted the agency to encourage businesses to work with qualified tax professionals to determine their eligibility for what it calls “an incredibly complex credit" with "very specific eligibility requirements." The IRS has received a spate of dubious claims for ERC credits promoted by so-called ERC mills.

“The IRS believes many of the applications currently filed are likely ineligible, and tax professionals note anecdotally that they are seeing instances where 95 percent or more of claims coming in recent months are ineligible as promoters continue to aggressively push people to apply regardless of the rules,” the IRS stated in its Sept. 14 announcement.

"We hope this moratorium will send a strong signal to anyone using these promoters that they are putting themselves at risk," IRS Commissioner Daniel Werfel told a news conference last week, Accounting Today reported. "We want businesses to step back and talk to a trusted tax professional, not a promoter out looking to take a big chunk of a refund."

One tax professional described to Accounting Today her experiences dealing with clients who have been targeted by ERC mills.

“We're really trying to be the steady hand on the wheel when [clients are] getting bombarded with constant interaction from the radio, television, phone calls and emails, and fake mailers from companies posing as the IRS saying this is your refund check," said Jen Rohen, a principal at CliftonLarsonAllen. "Then [the clients] call us and ask us what can we do, and in many instances, we have to deliver the news that we can't get comfortable with eligibility, and we can't advise them to put themselves at risk of penalties and interest and repayment and any of the other consequences if you don't take the credit."

While tax professionals expect further guidance from the IRS on a possible settlement program, they are being urged to follow the eligibility checklist provided by the IRS for vetting ERC claims, Accounting Today reported. The IRS is also planning to unveil a settlement program to aid businesses that mistakenly filed claims, which may function as a form of amnesty for erroneously filed ERC claims.

For now, accountants have to correct the financial statements of their clients, Rohen said.

"When we do the audited financial statements for clients who have fallen prey to somebody's scams, we have to note on the financial statement that we feel like that's an uncertain tax position," she said. "We worry about our clients who pay these exorbitant fees to the credit mills who aren't necessarily entitled to it and have to report it on their financial statements.”

To learn "Five Things you Might Not Know about ERC," attend the Foundation for Accounting Education's Suffolk Chapter: Legislative Updates Impacting New York CPA's Tech Session Webinar on Sept. 26.


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