ERC: Tax Experts Tackle Pandemic Aid Credit Scams

ERC: The IRS, politicians, and experts are all paying more attention to the ERC, which is a tax credit for pandemics. This Covid-19 aid credit gives small businesses hit by shutdowns a lot of money per employee. Scams try to get the credit, which makes people worried about how it will be given out.

Even if a business doesn’t qualify for credit, some companies push it on them. We call these “ERC mills.” Roger Harris from Padgett Advisors spoke up at a House Ways and Means Committee meeting. He said that the credit distribution was a scam because a lot of money was at stake.

As of July 26, the IRS was dealing with about 506,000 unresolved Form 941-X payroll tax returns. People are worried that companies will wrongly claim the credit, which could cause problems with checks in the future.

Pat Cleary, president and CEO of the National Association of Professional Employer Organizations, says that the backlog of legal ERC claims may be bigger because a single claim from a PEO can represent several small business.


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Because the problem is getting worse, the IRS has warned about “ERC schemes” and put them at the top of its list of the “Dirty Dozen” tax scams for 2023. To stop people from making fake claims, the government is doing more checks and investigations.

IRS Commissioner Danny Werfel said that the number of true cases is going down as time goes on since the peak of the pandemic. There have been more reports that don’t seem to be true. This is probably because people who promote credit use fake advertising to get business applications. The IRS might give businesses more time to change their tax returns.

Tax experts are trying to make sense of how complicated ERC claims are and helping small businesses figure out if they are eligible. Certified public accountant and partner at AGC CPA Larry Gray talked about how hard it is to explain to clients why they may or may not want to apply for the credit. He said that ERC workers might not handle income tax forms, which would cause confusion and give tax pros more work to do.

Harris said that audits alone wouldn’t be enough to solve the problem because of how big it was. Auditing won’t solve the problem on its own. Businesses that claimed the credit by mistake need a real-world plan to help them.

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