IRS Issues Warning on Employee Retention Credit

The Internal Revenue Service (IRS) has issued several warnings citing concerns that third-party promoters are pushing ineligible taxpayers to claim the Employee Retention Credit (ERC). The IRS is urging businesses to carefully review the ERC guidelines before claiming the credit. In the most recent warning, the agency noted “the IRS is actively auditing and conducting criminal investigations related to these false claims. People need to think twice before claiming this."

The ERC was a short-lived tax credit to support businesses that retained their workforce during the COVID-19 pandemic. To qualify for the ERC, employers must have had operations fully or partially shut down on order of an appropriate governmental entity or must have experienced a significant decline in gross receipts. The credit existed for part of 2020 and 2021.

The IRS has now issued several warnings to employers to be wary of third parties who are advising them to claim the ERC when they may not qualify. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit.

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