ERC PROGRAM UNDER ATTACK
Program Named to IRS’s “Dirty Dozen” List

In the February 2023 issue of PTT, I presented an article on the audit risks associated with the Employee Retention Credit (ERC). I pointed out that the IRS believes this credit is a source of substantial fraud. With four changes to the law over a span of just under two years, there is no doubt there is confusion with ERC qualifications. Mistakes will be made.

But in case you think I was being hyperbolic in my article last month, consider this: the IRS just added the ERC to its “Dirty Dozen” list. This is the agency’s list of top “scams that target taxpayers” for fraud using one or more strategies including email, text, and social media.

The IRS asserts that companies are promoting “ERC schemes on radio and online” for the purposes of making unlawful ERC claims to the agency. As usual, the IRS paints every business with the same brush. That is, if you are advertising services to help taxpayers, you must be committing fraud by pushing some scam. For my discussion of this same issue in the context of the Offer in Compromise program, see the July 2022 issue of PTT. And just like the Offer in Compromise, the ERC is not, by itself, a scam. Qualifying businesses are entitled to claim the credit and get their refund. That’s the law. Period.

Like anything else, the key for businesses is to work with a reliable firm so that incorrect facts are not used to support your refund claim. And, make sure you know what the potential audit issues might be regarding your ERC claim. Carefully review the five issues I delineated in the February 2023 newsletter.

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