Blog At A Glance:

Problem

Causes

Impact

Responses

Solution 

Current Status

Conclusion

 

Problem

The Employee Retention Tax Credit (ERC), a pandemic-era program designed to incentivize businesses to retain employees, was exploited by fraudulent actors and ineligible claimants. This resulted in a significant loss of taxpayer funds.

 

Causes

  • Open-ended eligibility criteria: The generous credit amount (up to $26,000 per employee) and initially unclear eligibility rules created an opportunity for abuse.
  • Rise of “ERC mills”: Pop-up firms and marketers aggressively promoted credit, leading to a surge of questionable claims even after the pandemic subsided.

 

Impact

  • Over $225 million in returned credits: Over 1,000 employees voluntarily returned credits through the IRS disclosure program.
  • Millions more recovered through audits: The IRS identified and assessed over $572 million in improper claims through audits.
  • $1 billion+ in potential losses: This includes returned funds, assessed claims, and the estimated impact of a congressional bill aiming to stop illegitimate claims.
  • Processing delays: The IRS is meticulously reviewing the remaining 1.2 million claims, leading to processing delays for legitimate businesses.

 

Responses

    • IRS initiatives:
      • Voluntary disclosure program with incentives for ineligible recipients to return funds.
      • Increased audits and enforcement actions.
      • Moratorium on processing new claims (until late spring 2024).
      • Criminal investigations into suspicious claims (~$3 billion worth).
    • Proposed legislation:
      • A bipartisan bill aims to cut off ERC claims filed after January 2024, potentially saving $78 billion.
      • The bill also proposes harsher penalties for ERC scheme promoters and extended audit windows for the IRS.
    • Considering a Second Look:Some businesses who used third-party advisors to claim the ERC may now be concerned about the validity of their claims, especially in light of the increased scrutiny.

     

    Solution

    Occams ERC Audit Advisory: Peace of Mind Through Expertise

    For businesses seeking clarity on their ERC claims, Occams Advisory offers a comprehensive ERC Audit Advisory service. Their team of tax specialists can help you:

      • Review your ERC eligibility: Determine if your business truly qualified for the credit based on the latest IRS guidelines.
      • Assess potential risks: Identify areas of concern within your original claim to minimize the chance of IRS penalties.
      • Develop a strategic response: If necessary, they can guide you through the IRS voluntary disclosure program or prepare for a potential audit.

    Don’t navigate this alone. Contact Occams Advisory today to schedule a free consultation and ensure peace of mind regarding your ERC claim.

    Current Status:

      • The IRS is still processing a backlog of claims and the moratorium on new claims remains in effect.
      • The fate of the proposed legislation in the Senate is uncertain.

     

    Conclusion

    The ERC program highlights the challenges of balancing economic stimulus with proper oversight. The IRS’s efforts to combat fraud and the potential legislative changes indicate a commitment to recouping misused funds. However, the long-term impact on legitimate businesses due to processing delays and stricter regulations remains to be seen. Businesses with concerns about their ERC claims are advised to seek professional guidance.

    Check out our website: www.occamsadvisory.com or Schedule a free consultation : Click here

    Disclaimer: The information provided in this case study is intended for general informational purposes only and are gathered from multiple news publications. The Information should not be construed as professional tax advice. Please contact Occams Advisory before executing any tax advice procured from above.