Employers Beware: IRS Cautions Employers Against Engaging Third Party Employee Retention Credit Consultants
By Mary Ellen Schill and Amy E. Ebeling
October 20, 2022
Recently, we have been fielding a fair number of inquiries from clients who have been approached by third parties urging them to claim the Employee Retention Credit (“ERC”). The ERC, which the federal government enacted back in 2020 to help blunt the economic impact of COVID-19, is a refundable tax credit designed to reward businesses that continued to pay employees during pandemic-related shutdown orders or experienced significant declines in revenue during the pandemic.
Qualifying for the ERC is difficult, so most businesses are unable to claim the credit. As such, we have advised employers to be skeptical of offers from third parties that urge them to claim the ERC. On Wednesday the IRS released an alert that echoes our concerns.
The IRS encouraged businesses to “be cautious of advertised schemes and direct solicitations promising tax savings that are too good to be true.” It goes on to outline how these third parties often misrepresent the likelihood that an employer will qualify for the ERC and, as part of a broader arrangement, offer to help employers secure the credit in exchange for large upfront fees or a percentage of the credit awarded.
Going forward, employers should continue to regard these kinds of offers skeptically, as scheming of pandemic-program profiteers. If you have engaged with one of these third parties and have taken credits or considered taking credits, contact us to discuss next steps.
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