September 25, 2023

Over the past few months, we’ve seen a concerning increase of advertisements for Employee Retention Credit (ERC) claims. This marketing is enticing since legitimate ERC claims can be very lucrative. However, these advertisements may intentionally be leading you into fraudulent claims.

When the ERC was first enacted, applicants could either receive the Paycheck Protection Program (PPP) loan or the ERC. When the structure transitioned to allow businesses to benefit from both programs, that is where things became a bit sticky. Furthermore, as of September 14, 2023, the IRS has ordered an immediate stop to the processing of new claims. With that being said, the following information outlines what a legitimate ERC request would look like.

Who is Actually Eligible for ERC?

The ERC was designed to assist businesses and organizations that continued to pay employees through the COVID-19 pandemic. Eligible entities range from restaurants to universities and museums to 501(C) organizations. It is important to note that independent contractors are not eligible for ERC. There are two options for ERC eligibility. An entity needs to only meet one of them:

  1. Your business faced a significant decline in revenue.
  2. Your business faced significant impact due to government restrictions.

What Does a Legitimate ERC Request Look Like?

ERC marketing has become aggressive and misleading by taking various forms of media: advertisements can be found on the radio, in phone calls, and even physical mail. Fraudulent marketing may outline large upfront fees or leave out important eligibility details, with providers not offering concrete backing to clients.

Though advertisements may lead you to believe that applying for ERC is risk-free, you may actually face consequences with the IRS should you improperly receive the tax credit. If an IRS agent does not sign off on your ERC application, you could be fully responsible for paying back any awarded credit, along with possible interest and fines. Overall, this is a risky place to be in with the IRS.

Instead, a legitimate ERC submission should be vetted by a trusted tax professional. A qualified professional should be able to provide you with a technical review of your eligibility after thorough review of relevant documents. If new claims become open to processing again and your eligibility is confirmed, businesses have until April 15, 2024, to file amended payroll tax returns for quarters in 2020 and until April 15, 2025, to file for quarters in 2021.

I Have More Questions. What Should I Do?

In the images below you can find some general information regarding the ERC program. While new claims will not be processed until 2024, if you have further questions regarding your ERC eligibility, we encourage you to ask us in an email.

© Clark Nuber PS, 2023. All Rights Reserved.

Image one of two of three column chart depicting information for the Employee Retention Credit.
Image two of two of three column chart depicting information for the Employee Retention Credit.
This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.