Please ensure Javascript is enabled for purposes of website accessibility

The IRS Is Ready to Strike the Fear of God Into Anyone Who Took ERC

gumshoe investigator, interrogator

For posterity’s sake, here’s what the IRS says about its open Employee Retention Credit (ERC) investigations as of January 25:

That’s nine open investigations, 123 under review, and anyone who comes forward to say they took ERC money they weren’t entitled to before the Voluntary Disclosure Program closes on March 22 will have to give up the name of the promoter that encouraged them to take the credits.

There is also a voluntary withdrawal program for anyone who had an open, unprocessed ERC claim floating around out there. The IRS says more than $167 million from pending applicants was withdrawn through mid-January.

Thousands of letters have gone out to taxpayers notifying them of disallowed ERC claims, claims that failed to meet the basic criteria for the ERC program such as A) being a business and B) having employees on the payroll.

They also plan to start sending letters to thousands of ERC recipients who may have claimed an erroneous or excessive credit. These notices inform recipients that the IRS will recapture the erroneously claimed ERC payment through normal tax assessment and collection procedures.

These letters are for tax year 2020 where the statute of limitations is nearing in April, more will be sent for tax year 2021 this spring.

The IRS issued an immediate moratorium on ERC claims last September and has not yet announced when that will be lifted.

9 thoughts on “The IRS Is Ready to Strike the Fear of God Into Anyone Who Took ERC

  1. We are a small business and had a ton of companies approach us to apply for this credit. We researched it and determined it did not apply to us. We did not take a dime. The IRS should run the numbers on anyone that did.

    1. start with the Law Firms that got $350K+ , then the Drs- they did the same as Liars/Lawyers

    1. Employee Retention Credit – it is the “$26,000 per employee” ads that have been everywhere for the last 3 years. It was originally part of the CARES Act along with the PPP but originally you couldn’t do both. It was changed at the end of 2020 to allow that – unscrupulous promoters jumped on it and the IRS paid out indiscriminately without enough upfront screening. IRS is now starting to audit after the fact and bring the hammer down.

    2. Yeah, basic law of journalism, don’t assume.

      ERC is Employee Retention Credit, the refundable tax credit for certain eligible businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.

      1. This is a publication for accounting professionals, they know what ERC is as we’ve been covering the fallout extensively. We didn’t expect this article would get so much attention from civvies.

        “Employee Retention Credit” is right there in the first sentence.

        1. As a “civvie” business owner I have been scouring the web for an explanation why we have not received our ERC money which we qualified for to my detriment, kept every paid when there was no work and I assumed loans to keep my talent.
          We applied last March, in house with known accountants that we have been working with for years, I paid a fair percentage and them knowing me I would not tolerate anything that would compromise my name and integrity.
          We are now a year in and the loans have not been paid back, as soon as if and when that ERC check hits it is gone and I have to pay tax on it next year. I appreciate your article at least I have insight but I am angry that as a rule follower and always putting my customers and employees first that I am now in limbo because of others greed.

  2. We prepared several dozen of these and have had 2 audits which we passed with flying colors. If the IRS wants to look at any others we prepared, my PTIN, name and number are at the bottom of each of them, they know where to find me.
    We also turned away many people who did not qualify and more who qualified for only a small number. I’m sure those folks went out and and got one of the ERC mills.
    If a complete and honest accounting is ever done of this credit I believe is will prove to be the largest fraud in history. Billions were paid out with no verification or oversight. Dishonest “$26,000 per employee” service providers based their marketing pitch on “your CPA doesn’t know what he’s talking about” and charged a preposterous 25% contingent fee (which flies in the face of Circular 230). They are closing up shop and heading for the hills with millions in ill-gotten taxpayer money.
    I have a modicum of sympathy for the business owners who were duped into this, but exactly none for the ERC mills and their owners / employees. We should all be rooting for the IRS to nail these people – they belong in jail.

  3. I had a small business, with an annual payroll of about 120,000. I did get some ERC money, nothing near the 26K per employee because you had to not count wages paid with Payroll Protection Program money, and any other programs. It was extremely complicated, per person wage caps etc, even when my CPA tried to explain it to me with a color coded spread sheet, still was lost (and I was Mensa in college). But I got SO many mailings of misleading information promising large sums. These companies sprang up, charge an exhorbitant percentage (which makes no sense, my cpa charges set rates) and they will be long gone when you get audited and fined and have to pay it all back. Good luck explaining their math. My cpa turned down many of his clients that did not qualify, and now is having to file amended returns for them, when they had the ERC credit done by one of these gypsy companies, since you must report the money back in the year you had the wages for the ERTC (is what I knew it as). I never want trouble with the IRS, too stressful.

Comments are closed.