IRS Issues Renewed Warning on Employee Retention Credit Claims

AAFCPAs reminds clients to remain vigilant of promoters providing misleading guidance as it relates to the Employee Retention Credit (ERC). The Internal Revenue Service recently issued a renewed warning urging people to carefully review ERC guidelines before claiming the credit.

We continue to see third parties aggressively promoting ERC schemes on both the radio and online. Promoters not only lead individuals and businesses into compliance risk for claiming the credit but also charge large upfront fees or a fee that is contingent on their refund amount. Adding to this, promoters may not inform taxpayers that wage deductions claimed on their business’ federal income tax return must be reduced by the amount of the credit.

“While this is a legitimate credit that has provided a financial lifeline to millions of businesses, there continue to be promoters who aggressively mislead people and businesses into thinking they can claim these credits,” said Acting IRS Commissioner Doug O’Donnell. “Anyone who is considering claiming this credit needs to carefully review the guidelines. If the tax professional they’re using raises questions about the accuracy of the Employee Retention Credit claim, people should listen to their advice. The IRS is actively auditing and conducting criminal investigations related to these false claims.”

If your business has already filed an income tax return with qualified wages deducted before filing an employment tax return claiming the credit, we recommend you file an amended income tax return to correct any overstated wage deduction. If the ERC is claimed improperly, the IRS can require you to repay that credit with penalties and interest.

As with all tax credits, there are significant rules and potential pitfalls. If you have questions about the ERC credit, please contact Enis Bezhani, CPA, MSA at 774.512.4045,; or your AAFCPAs Partner.

About the Author

Enis has extensive experience providing audit, tax, and advisory solutions to sophisticated nonprofit organizations, including charter schools and charter management organizations (CMOs), community development corporations (CDCs) and their affordable housing projects, and arts and cultural organizations. He specializes in directing teams in performing financial statement audits in accordance with Uniform Guidance/Single Audit and Government Auditing Standards, as well as those with U.S. Department of Housing and Urban Development (HUD), and Massachusetts Uniform Financial Statement (UFR) compliance requirements.