The IRS recently issued a warning bringing attention to third parties who are seemingly targeting employers who may be eligible to claim the Covid-era Employee Retention Credits.
In short, one might construe that the warning implied that there are third parties who may be encouraging employers to take “improper positions” related to eligibility and computation of the ERC.
The IRS warning goes on to state that employers should be cautious of “advertised schemes and direct solicitations” that sound too good to be true.
The ERC is a refundable tax credit made possible by the CARES Act, and the intent was to encourage businesses to keep employees on their payroll during a shutdown or when a business had a significant decline in gross receipts.
The ERC is available for periods from March 13, 2020 to December 31, 2021 for most employers, and through 12/31/21 for recovery startup businesses. However, businesses must meet certain criteria to be eligible for the ERC. In its news release warning of these “schemes”, the IRS made it clear that eligible employers must have:
- sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during 2020 or the first three quarters of 2021,
- experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021, or
- qualified as a recovery startup business for the third or fourth quarters of 2021.
As a reminder, employers are not eligible to claim the ERC on wages for any quarter that it reported those wages as payroll costs in obtaining PPP loan forgiveness.
For more details regarding the ERC, click here.