Employers should be cautious of third-party companies encouraging them to claim credit for employee retention though they are unqualified. Improper positions associated with taxpayer eligibility and credit claims are being filled by these deceptive companies. This article ensures taxpayers are aware of proper Employee Retention Credit filings.
An Employee Retention Credit (ERC) is defined as a tax credit that is refundable and is issued for businesses that paid employees during the COVID-19 pandemic. Businesses with a decline in gross receipts from March 13, 2020 – December 31, 2021 are eligible for this credit.
A massive upfront fee is charged and is dependent upon the potential refund. These companies also fail to make taxpayers aware of federal income tax that must be adjusted according to the amount of credit. This can put the employer in a negative circumstance with the IRS.
If a business submitted a tax return with the qualified deductions, that company must file a correction through an amended tax return. Doing this will prevent any violations and filing disqualifications. Wage deductions can be listed as overstated if the amending process is not taken.
If solicitations seem too good to be true, they may be a scam. This is crucial for taxpayers because they are responsible for all reported tax information. An improperly filed ERC can result in required repayments, penalties, and interest.
To qualify for the ERC, employers must fulfill one of the circumstances below:
- Maintained operational suspension (full and/or partial) due to the COVID-19 pandemic throughout 2021 or the first 9 months of 2021
- Employer experienced a major reduction in gross receipts during 2020 or the first 9 months of 2021
If you have questions about your ERC or want to learn more about tax updates from the IRS, visit our website.