The ERC is one of the most widely advertised tax credits in recent history, and with a little under two years to go, there are still many businesses that are simply unaware of the credit and/or are concerned about filing for the credit.
The IRS has acknowledged that the tax credit is real, but that proper analysis must be performed correctly to ensure an accurate filing. To date, it is believed that the IRS has processed over $150B in ERC claims for businesses, with an additional 800,000 pending businesses.
There are many firms throughout the country promising free money without performing any analysis or data/industry research. They are performing incorrect calculations, refusing to apply aggregation and/or family ownership rules, as well as not reducing for prior PPP forgiveness payroll allocations. Often they also do not inform their clients that prior year tax returns must be amended to properly account for the credit, leaving large tax surprises.
Many websites, and 1-800 numbers, claim that you can qualify for the ERC in as little as eight minutes and that all businesses qualify. While you may ultimately qualify, to ensure you accurately follow all guidance and understand what an eligible employer is you will need to allocate much more time to the program. They also provide fake deadlines, the actual deadline is April 15, 2024 (2020 amendments) and April 15, 2025 (2021 amendments) as mentioned above. Important to note that this statute does not start over with an amended return.
The IRS is also certainly aware of fraud taking place, as many are filing fake 941s and 941x with fake wages paid to fake employees that don't exist. The IRS has recently put out a few notices on this topic and from our review, one of the biggest requirements that they are stressing the most is the accurate calculation of the credits and ensuring that the business owner pays the tax that is owed via an amended return for 2020 and/or 2021.
These are two areas that we are experts on; our calculations will be flawless, and we provide every client with a next-steps guide on how to accurately report the ERC. This next-steps guide is here.
Some important areas that are discussed with each business are listed below:
Full-Time Employee Count to determine small vs large employer status Aggregation rules Related party guidance Accurate calculations accompanied with PPP loan forgiveness analysis (including: the R&D Credit and other covid related tax credits and grant programs) Nominal impact analysis based on client specific circumstances Next steps to reduce your wage expense to properly account for the ERC
The ERC is real, but business owners must ensure they are following the proper IRS guidance and steps to ensure a complete and accurate filing is completed.
Contact the team at Shell Consulting Group, LLC to learn more about how you may be eligible for the ERC.