By Cooper Melvin, J.D., CPA

In a news release today, the IRS warned employers to be wary of third parties who are advising them to claim the Employee Retention Credit (ERC) when they may not qualify. The release encourages businesses to be cautious of solicitations that are “too good to be true.” An improper ERC claim could result in the business being required to repay the credit and incur penalty and interest charges.

When claimed properly, the ERC provides much-needed tax relief measures. However, people claiming to be “ERC professionals” are causing major issues for businesses. BMSS as well as some other traditional tax advisors refer to these third-party providers as ERC sharks. They often charge significant advance fees or percentage fees that are contingent upon the amount of the credit claimed. The providers do not always apply the eligibility and computational rules correctly, whether by intentionally disregarding or by negligently failing to properly understand the rules.

According to Accounting Today, the IRS has identified 11,000 “suspicious” returns claiming more than $2 trillion in ERC. In another instance, Accounting Today identified a third party charging $37,000 to erroneously claim a credit of $148,000 for a business based on a misapplication of the gross receipts eligibility requirements.

The IRS is very aware of these fraudulent claims and is taking precautions to detect such fraud. In fact, the IRS is required to review all ERC claims for eligibility. Ultimately, businesses are liable for any of the erroneously claimed credits and will most likely not be reimbursed for fees paid to third parties. Therefore, it is important not to fall into the traps ERC sharks set up. Instead, clients should consult with their long-term, trusted CPAs and advisors to ensure that if they do use a third party for ERC work, they are using a qualified professional that performs the necessary work assiduously.

BMSS has a dedicated team that focuses exclusively on the ERC. Please contact your BMSS advisor if you are interested in determining your eligibility or if you believe you are a victim of an ERC shark bite by calling (833) CPA-BMSS.

Overwhelmed by the barrage of Employee Retention Credit (ERC) messages? Let BMSS Advisors & CPAs help clear the confusion and assess whether it’s a good option for your business. Call us today at (833) CPA-BMSS.


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