ERC Advise

[tsorensen]

We have had quite a few of our clients that have outsourced for the ERC credit. When I check the IRS information about ERC it doesn't look like most of our clients should have received any credits, but somehow they did. We have a client right now who received almost $700,000 in credits. When I looked at it I see that they did qualify for the credit for 3 quarters but the CPA office that did the credit for them did it for 6 quarters, nor did they advise the client that the corporate income  tax returns need to be amended for 2020 and 2021. And the client is under the impression that the credit is not taxable. Are we completely missing something here? Is there someone here that would be willing to help me understand this stuff? 

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??? 

So confused!

[Just-Lisa-Now-]

"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...

https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employ...

[IRonMaN]

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.

[tsorensen]

I have seen those. But the company that did these credits for this particular client seems to be a legit CPA office. They wouldn't be scamming would they? They also charged the client a percentage of the refund which I found fishy but them being a CPA office makes me question my own abilities.

[IRonMaN]

"but the CPA office that did the credit for them did it for 6 quarters, nor did they advise the client that the corporate income  tax returns need to be amended for 2020 and 2021"

How legit are they?   I remember the good old days when CPAs were not allowed to bill based on a percentage of a refund under any circumstances.  I miss those days.

[IRonMaN]

As a side note, we have a local CPA that has been "very helpful" in helping businesses receive ERC credits.  So helpful in fact, he is getting credits for people that I am confident didn't qualify for the credits.

[qbteachmt]

Are you signed up for e-newsletters to your email inbox?

Issue Number: 2023-08

What the IRS is doing and what you can do to avoid Employee Retention Credit scams

The IRS shared new steps the agency is taking to prevent honest taxpayers from falling victim to Employee Retention.... The IRS continues to warn small businesses about aggressive promoters encouraging filing potentially ineligible claims. The IRS urges small businesses to check with a trusted tax professional about ERC instead of relying on a promotion company.

The steps include a moratorium on processing new ERC claims through at least the year’s end to prevent further abuse from predatory promoters using the ERC to scam businesses and organizations. Special withdrawal options and settlement initiatives are being prepared to help businesses that have been misled into claim the ERC. In addition, the IRS understands the valuable impact of the ERC credit and is working to process valid ERC claims filed before the moratorium, but with increased scrutiny.

New resources to help businesses navigate complex ERC

• Special eligibility checklist. The IRS created a new ERC eligibility checklist that provides a quick, high-level way for employers to figure out if they might qualify to claim the ERC or if they potentially need to resolve an improper claim. Given that some small businesses may have been misled by aggressive promoters, this checklist is an important reference tool to use along with checking with a trusted tax professional.
• New FAQs. The IRS also updated the Frequently asked questions about ERC with new questions and answers.

Be aware of the warning signs of aggressive promotion for the ERC. Aggressive tactics are a red flag.

Be sure to check IRS.gov/ERC for updates and ways to report a scam involving ERC, which is also sometimes called the Employee Retention Tax Credit or ERTC.

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[BobKamman]

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.  

[tsorensen]

I did not start out my discussion questioning the ethics of a CPA firm. My question was about not understanding what I was missing about the ERC and looking for people to help me. If I remember correctly I said "what am I missing?". I am not trying to put down this CPA firm in anyway. I am very sorry if my question in any way insinuated that. 

[IRonMaN]

I would have to be the party that was guilty on insinuating that.  If they were that wonderful of a firm they would have at least given the client a hint that they would need to amend some returns.  And how did the client end up down there to begin with?  Did the firm go on a fishing trip looking for new fish to catch by contacting the client and telling them that they were going to be able to save them a billion dollars through their great skill and knowledge?  Taking a percentage of the payoff should be left to ambulance chasing lawyers, not CPAs.

[rbynaker]

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@IRonMaN wrote:

As a side note, we have a local CPA that has been "very helpful" in helping businesses receive ERC credits.  So helpful in fact, he is getting credits for people that I am confident didn't qualify for the credits.

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Wait, aren't there only two CPAs in your town?  And you're married to the other one . . .

[IRonMaN]

There are a few others ——— that I am not currently or formerly married to.😜