ERC Advise

"In my thought process the credit reduces the payroll expenses for those years which increases the net income. Which is taxable. What am I missing??? "

Youre not missing anything, youre correct, those prior year returns need to be amended to account for the credits they received....these ERC credit mills are just slamming out credits (and collecting HUGE fees) whether people really qualify or not and theyre not following up on the rest of what needs to be done.

Have you see these?  Prepare your clients now for the inevitable IRS audit that will follow at some point

https://www.irs.gov/newsroom/irs-opens-2023-dirty-dozen-with-warning-about-employee-retention-credit-claims-increased-scrutiny-follows-aggressive-promoters-making-offers-too-good-to-be-true

https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employee-retention-credit-processing-amid-surge-of-questionable-claims-concerns-from-tax-pros

Some CPA's had to cheat to pass their ethics exam.  Those are the folks that are cranking out the ERC credits and leaving destruction in their path to earn premium fees.  It sucks.

This is hilarious.  You're questioning the ethics of a CPA firm that noticed your client qualified for three quarters of the ERC, something that apparently you missed.  But now you are certain that they are wrong about another three quarters.  People who live in glass houses shouldn't call kettles black.  Or something like that. 

The ethical question now is whether you should continue to consider these taxpayers your client.  Have they asked you to do amended returns?  Are you insisting on doing them?  I think "former clients" is a better description.