The federal government committed to protecting American workers with the Employee Retention Credit. Business owners have the opportunity to claim a $26,000 per employee tax credit for keeping workers on payroll – but the IRS wants to make sure that’s actually where the credit is being applied.
IRS officials put out a warning recently, informing employers to be aware of third parties that are attempting to subvert this process. Do you know if you actually qualify? It’s important to remember which businesses and circumstances meet the qualifications for the Employee Retention Credit.
Who Qualifies?
In order to qualify for the ERC, businesses must have retained employees on the payroll even when the business was forced to close or faced significant limitations due to COVID-19. The CARES Act explains that to be eligible the business “must have been carrying on a trade or business during the calendar quarter” but excludes government entities with the exception of colleges, universities, and any government entity whose primary purpose is to provide medical care.
This covers a wide range of businesses as long as they were eligible during the periods in which the tax credit is being claimed. Your business must have been doing business and impacted by COVID-19 for a quarter between March 13, 2020, to December 31, 2021. There are different qualified wages for periods within that timeframe which can be found on the IRS website.
If you are reading this and realized you were eligible but never claimed the credit you can file amended tax returns for the applicable periods you were eligible. It’s imperative that you work with a tax professional on this process.
How Are False Claims Being Filed?
Earlier this year, the IRS announced over 11,000 suspicious returns had claimed more than $2 trillion in credits. So, where could thousands of claims be coming from?
Third parties are praying on businesses, hoping to loop them in on the scheme to claim a credit that isn’t owed to them. These entities convince businesses they’re missing out on massive refunds to businesses without even verifying their eligibility in the first place.
What Can You Do?
At this point, if you’ve already fallen victim to these schemes you’re likely going to have the IRS breathing down your neck. The IRS holds taxpayers (including businesses) accountable for the information on their tax returns regardless of who filed them or what information was or wasn’t provided to the third party. You’re going to need a tax professional by your side through this process to get your books corrected and to make sure you don’t end up in much worse trouble with the IRS through failed remedies.
If you haven’t fallen victim to these schemes the best advice we can give you is to trust your tax professional. If you’re not sure if you’re eligible but your tax adviser hasn’t claimed the credit it can’t hurt to talk to them. In all likelihood, they’ve already verified that you aren’t eligible and therefore didn’t make the claim.
Attorney Tyler Q. Dahl has his Master’s in tax law and can help your business navigate these troubled waters. Whether you need help verifying your eligibility or are going to need to work your way through the issue with the IRS, the Law Offices of Tyler Q. Dahl are your best bet. Communicate with us promptly and get ahead of this issue before it buries your business.
Dahl Law Group
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