Do You Need a Second Look at Your ERC Claim?

The Internal Revenue Service (IRS) released a moratorium on processing Employee Retention Credit (ERC) claims through the end of 2023, citing its significantly high volume of ERC claims that have yet to be processed as well as concern over questionable claims and potential ERC scammers. Taxpayers who already filed their claim before the moratorium’s release and/or have concerns about the ERC provider preparing their claim should consider getting a second look at claim validity and eligibility from a qualified tax professional to minimize potential adverse consequences from the IRS.

IRS Commissioner Expressed Prior Concern in Tax Forums

At an IRS Tax Forum earlier this year, Windham Brannon’s Tax Controversy Practice leader Tomika Bullet joined 14 other tax leaders and professionals and IRS Commissioner Danny Werfel to discuss recent issues tied to the ERC. During the Forum, Commissioner Werfel expressed his concerns that more businesses that technically did not qualify for the ERC could fall victim to third-party companies that aggressively advertise a way to calculate the credit while profiting from hefty fees. There is further concern for some CPA firms and sole practitioners who could face a malpractice claim if they filed an amended tax return that inaccurately reflects ERC credits, even if they did not prepare the ERC calculation.

What’s clear is that the IRS has been vigilant to adamantly warn taxpayers of potential scams and false claims to calculate the credit, with several alerts coming in recent months prior to the recent moratorium release from the IRS Newsroom to beware of potential ERC scammers. Additionally, the IRS had indicated that they have a specific focus on ERC claims, as extra staffing have been designated to help process Form 941-X and reduce any backlog. These personnel reviewing Form 941-X claims are also working with the Criminal Investigation (CI) division regarding any questionable claims.

Why You Need a Second Look

If you have already claimed the ERC, you should consider getting a second look evaluation of your claim from a qualified tax provider with significant experience in ERC. Here’s why:

Firstly, the IRS’s position regarding ERC is enough motivation to take the eligibility and validity of a claim very seriously.

• The IRS is obviously increasing its scrutiny of ERC claims. The IRS has stated that it will be carefully reviewing ERC claims to ensure for validity and accuracy. If you are audited by the IRS regarding your ERC claim, you will need to provide evidence and documentation to support and prove your claim.
• The ERC Q&A’s have been updated. The IRS released updated Q&As for the ERC on the same date of the moratorium’s release. This is good news, as this new guidance may provide clarity to taxpayers and their tax providers regarding eligibility for the credit.

Secondly, if any of the below scenarios describes you, a second look can help alleviate and address any concerns you have regarding your ERC claim.

• You are concerned about the ERC provider who prepared your claim. One of the IRS’s main concerns is the increase in ERC scammers who aggressively market to help employers file the ERC. Consider a second look at your ERC claim if any of the following applies to you:

• You were guaranteed your eligibility and a credit before your numbers were even reviewed.
• You responded to an ad or email marketing campaign that actively solicited your business.
• You did not receive the full documentation and explanation behind your eligibility.
• You did not utilize a qualified CPA firm that has experience in filing these claims.
• The company you used for the computation is no longer in business.

• You were unsure about your eligibility for the credit when you originally claimed it. The ERC eligibility rules are considerably complex. If you were unsure about your eligibility when you originally claimed the credit, it may be worth getting a second look evaluation to ensure that you claimed the credit correctly.
• You claimed the credit, but you are not sure if you calculated it correctly. Accuracy in the ERC calculation is imperative. If you are unsure if your ERC calculation was correct, a second look evaluation can ensure you avoid potential errors.
• You feel unprepared for a potential ERC audit from the IRS. If you feel unprepared in the event you are subject to an ERC audit, a second look at your ERC claim can help you feel prepared to defend your claim.

Windham Brannon’s ERC Risk Assessments

Windham Brannon’s experienced tax professionals provide ERC Risk Assessments to identify discrepancies in advance of filing amended returns, take advantage of any suspected amnesty programs as well as help minimize a potential ERC audit from the IRS. During our second look review, we review and verify the following information:

• Your ERC eligibility of either your gross receipts calculation or your partial shutdown due to government mandate criteria.
• That you were appropriately deemed a small or large business employer.
• That you correctly considered your Paycheck Protection Program (PPP) loan.
• That you excluded owners and relatives from the employee calculations.
• Recalculate and file your amended return, if necessary.

For more information, contact your Windham Brannon advisor or reach out to Tomika Bullet.