joseph castellano

The IRS urges businesses to review their eligibility for the Employee Retention Credit because there’s limited time for them to voluntarily resolve incorrect claims and avoid future issues, such as penalties and interest.

Some honest businesses were misled into filing claims for the Employee Retention Credit by promoters who often misrepresented or oversimplified eligibility rules. Businesses that received the credit but don’t meet the ERC rules should consider applying for the ERC Voluntary Disclosure Program before the March 22 deadline. The IRS also offers a withdrawal program for those whose claims haven’t yet been paid.

The ERC, sometimes called ERTC, is a refundable tax credit for certain eligible businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. The requirements vary depending on the time of claim, and it is not available to individuals.

ERC Voluntary Disclosure Program open until March 22, 2024
Businesses that filed a claim in error and received a payment may be able to apply to the IRS Voluntary Disclosure Program. The special program runs through March 22, 2024, and lets taxpayers repay just 80% of the claim received.

Withdrawal program still available for pending ERC claims
The IRS continues to accept and process requests to withdraw a full ERC claim. Employers that claimed an ERC that hasn’t been paid can withdraw their claim so they don’t get a refund for which they’re ineligible and can avoid penalties and interest. They can also withdraw their claim if they’ve received a check but haven’t deposited or cashed it.

ERC information for businesses with questions
IRS offers resources online to answer questions and help employers check whether they’re eligible for the credit. They can review the ERC frequently asked questions and the ERC Eligibility Checklist, which is available as an interactive tool or as a printable guide. The IRS also has free recorded webinars for the withdrawal process and the VDP.

Moratorium status
Following concerns from tax professionals and others about aggressive ERC marketing, the IRS announced on Sept. 14 a moratorium on processing new ERC claims. In the coming months, the IRS plans to continue steps on fraud protection measures, which are necessary before the IRS anticipates resuming processing of claims submitted after the Sept. 14 moratorium. A date hasn’t been determined.

The IRS continues to process ERC claims submitted before the moratorium, but with higher scrutiny and at a much slower rate.

WASHINGTON – The Internal Revenue Service renewed calls today for businesses to review their eligibility for the Employee Retention Credit as the agency’s law enforcement arm, Criminal Investigation (CI), begins a series of educational sessions for tax professionals.

As part of ongoing IRS efforts around the pandemic-era credit, the agency continues to increase compliance activity to protect against fraud. The IRS also renewed calls for businesses and employers to review their qualifications for the Employee Retention Credit, or ERC. If businesses do not meet the criteria, but claimed the credit, they should consider applying for the Voluntary Disclosure Program before the March 22 deadline. The IRS has also created a special withdrawal program for those with pending claims about which they have eligibility concerns. Both programs can help affected employers avoid penalties and interest on incorrect claims.

“Our compliance activities involving these payments continue to accelerate, and the IRS urges businesses with concerns about their claims to talk to a reputable tax professional and consider joining one of our special disclosure or withdrawal programs,” said IRS Commissioner Danny Werfel. “We saw aggressive marketing around this credit, and well-intentioned businesses were misled into filing claims. There’s a limited time window available for these businesses to voluntarily come in and avoid future issues.”
In the latest effort, CI special agents will host a series of educational sessions geared specifically to tax professionals about ERC at its field offices across the country. The sessions will take place in February and are part of a nationwide initiative to ensure that tax professionals have the latest information about ERC claims and understand ERC eligibility criteria.

The IRS has been working closely with the tax community following concerns that ERC promoters were aggressively marketing and encouraging businesses to ignore the advice of tax professionals and apply for the credit anyway.

“During the COVID-19 pandemic, tax credits and loans were extended to struggling businesses. We’ve seen many of these COVID-relief programs and credits misappropriated – sometimes knowingly and in other instances not,” said IRS CI Chief Jim Lee. “These educational sessions will help tax preparers navigate the complexities of ERC claims to ensure they’re in compliance with U.S. tax laws.”

CI special agents will walk attendees through ERC eligibility criteria, documentation requirements to receive ERC claims, and best practices for compliance and accurate reporting. These events will take place in at least 23 U.S. states and the District of Columbia and are specifically designed for tax professionals who have claimed ERCs for their clients on previous years’ tax returns. Invitations to attend will arrive by mail through the U.S. Postal Service.

The ERC is a refundable tax credit for certain eligible businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. The requirements vary depending on the time of claim, and it is not available to individuals.

With the end of the pandemic, the IRS announced in July it was shifting its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims.

Following concerns about aggressive ERC marketing from tax professionals and others, the IRS announced Sept. 14 a moratorium on processing new ERC claims. During the next four months, the IRS plans to continue steps on fraud protection measures, which are necessary before the IRS anticipates resuming processing of claims submitted after the Sept. 14 moratorium. A specific resumption date has not been determined.

The IRS continues to process ERC claims submitted before the moratorium, but with additional scrutiny and at a much slower rate than before the agency’s approach changed in the summer and fall. Since the IRS announced the moratorium in September, the IRS has more than $1 billion in ERC claims in process. Enhanced compliance reviews of the claims submitted before the moratorium is critical to combat fraud and protect businesses and organizations from facing penalties or interest payments stemming from bad claims pushed by promoters. Werfel has noted the IRS continues to make progress on a variety of ERC issues.

To help businesses lured into making inappropriate claims, the IRS has several special initiatives underway to assist.

ERC Voluntary Disclosure Program open until March 22, 2024

Businesses that filed a claim in error and received a payment may be able to participate in the IRS Voluntary Disclosure Program. The special program runs through March 22, 2024, and the IRS has added provisions allowing repayment of just 80% of the claim received. This reflects the share that ERC promoters took of a business’ ERC payment – frequently around 20%.

Withdrawal program still available for pending ERC claims

The IRS continues to accept and process requests to withdraw an employer’s full ERC claimunder the special withdrawal process.

This withdrawal option allows certain employers that filed an ERC claim, but have not yet received a refund, to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that has not yet been paid can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible. They can also withdraw their claim if they’ve received a check but have not yet deposited or cashed it.

The IRS continues to see a large number of employers interested in the withdrawal program, with more than $167 million from pending applicants withdrawn through mid-January.

ERC eligibility information for businesses with questions

For more information on ERC eligibility, the IRS has prepared special information to help businesses understand the complex guidelines about the credit, sometimes referred to as the Employee Retention Tax Credit or ERTC. The special information includes ERC frequently asked questions and the ERC Eligibility Checklist, which is available as an interactive tool or as a printable guide. The interactive tool provides an easy, interactive way for businesses to check their eligibility.

Increased IRS compliance activity: Audits, criminal investigations, special letters

Last month, the IRS started sending thousands of letters to taxpayers notifying them of disallowed ERC claims. These disallowed claims involved entities that did not exist or did not actually have employees on the payroll during the period of eligibility – meaning the businesses failed to meet basic criteria for the ERC program.

In addition, the IRS plans to send a different set of letters to thousands of ERC recipients related to claiming an erroneous or excessive credit. These notices inform recipients that the IRS will recapture the erroneously claimed ERC payment through normal tax assessment and collection procedures.

These letters are for tax year 2020 where the statute of limitations is nearing in April. As we continue to ramp up our compliance work, the IRS will send more recapture letters for tax year 2021 this spring.

These efforts are in addition to other IRS compliance work:

  • Audits. The IRS has thousands of audits in the pipeline.
  • Civil investigations. Promoters are not off the hook. Promoter investigations are ongoing. The IRS has nine open investigations and another 123 under review. Plus, participants in the Voluntary Disclosure Program must share the promoter names with the IRS to assist the agency in its ongoing compliance work.
  • Criminal Investigation. As of Dec. 31, CI has initiated 352 investigations involving more than $2.9 billion in potentially fraudulent ERCs in tax years 2020-2023. Eighteen of the 352 investigations have resulted in federal charges, with 11 convictions and four sentencings with an average sentence of 21 months.

CI is the law enforcement arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI is the only federal law enforcement agency with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a nearly 90% federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.

WASHINGTON – With tax season rapidly approaching, the IRS reminds employers that Jan. 31 is the deadline for submitting wage statements and forms for independent contractors with the government.

Employers must file their copies of Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31.

The Jan. 31 deadline also applies to Forms 1099-MISC, Miscellaneous Income, and Forms 1099-NEC, Nonemployee Compensation, that are filed with the IRS to report non-employee compensation to independent contractors. Various other due dates related to Form 1099-MISC, Form 1099-K and Form 1099-NEC, including dates due to the IRS, can be found on the forms’ instructions.

The IRS offers a free electronic filing service for the Form 1099 series using the Information Returns Intake System (IRIS). Filers can also use this online portal to prepare payee copies for distribution, file corrections and request automatic extensions.

New filing requirements

New electronic filing requirements affect Forms W-2 that are required to be filed in 2024. Businesses that file 10 forms or more must file W-2s and certain information returns electronically. See New electronic filing requirements for Forms W-2 for more information.

E-filing is the quickest, most accurate and convenient way to file forms. For more information on e-filing Forms W-2, employers can refer to Employer W-2 Filing Instructions & Informationon the Social Security Administration’s website.

Key points to remember

  • Extensions to file are not automatically granted. Employers may request a 30-day extension to file Forms W-2 by submitting Form 8809, Application for Extension of Time to File Information Returns, by Jan. 31.
  • Filing Form 8809 does not extend the due date for furnishing wage statements to employees. A separate extension must be filed by Jan. 31. See Extension of time to furnish Forms W-2 to employees for more information.
  • Filing by the deadline helps the IRS to fight fraud by making it easier to verify income. Employers can help support that process and avoid penalties by filing the forms on time and without errors.
  • Penalties may be assessed for failure to file correctly and on time. For more information visit the IRS’ Information Return Penalties page.
  • Form 1099-K $600 reporting threshold delayed. This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

The IRS encourages employers and taxpayers to visit About Form W-2, Wage and Tax Statement and Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G for more information.

WASHINGTON — The Internal Revenue Service today announced tax relief for individuals and businesses affected by Idalia, anywhere in South Carolina. These taxpayers now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments. This is similar to relief already being provided in most of Florida.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). All 46 counties in South Carolina qualify. Individuals and households that reside or have a business in these counties qualify for tax relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

Filing and Payment Relief
The tax relief postpones various tax filing and payment deadlines that occurred from Aug. 29, 2023, through Feb. 15, 2024 (postponement period). As a result, affected individuals and businesses will have until Feb. 15, 2024, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the Feb. 15, 2024, deadline will now apply to:

  • Individuals who had a valid extension to file their 2022 return due to run out on Oct. 16, 2023. The IRS noted, however, that because tax payments related to these 2022 returns were due on April 18, 2023, those payments are not eligible for this relief.
  • Quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024.
  • Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31, 2024.
  • Calendar-year partnerships and S corporations whose 2022 extensions run out on Sept. 15, 2023.
  • Calendar-year corporations whose 2022 extensions run out on Oct. 16, 2023.
  • Calendar-year tax-exempt organizations whose extensions run out on Nov. 15, 2023.

In addition, penalties for the failure to make payroll and excise tax deposits due on or after Aug. 29, 2023, and before Sept. 13, 2023, will be abated as long as the deposits are made by Sept. 13, 2023.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these kinds of unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Additional Tax Relief
Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2023 return normally filed next year), or the return for the prior year (2022). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. Be sure to write the FEMA declaration number – DR-3597-EM − on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

The IRS may provide additional disaster relief in the future.

The tax relief is part of a coordinated federal response to the damage caused by this storm and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

Kilolo Kijakazi, Acting Commissioner of Social Security, announced 12 new Compassionate Allowances conditions: 1p36 Deletion Syndrome, Anaplastic Ependymoma, Calciphylaxis, Cholangiocarcinoma, FOXG1 Syndrome, Leber Congenital Amaurosis, Metastatic Endometrial Adenocarcinoma, Paraneoplastic Cerebellar Degeneration, Pineoblastoma – Childhood, Primary Omental Cancer, Sarcomatoid Carcinoma of the Lung – Stages II-IV, and Trisomy 9.

The Compassionate Allowances program quickly identifies claims where the applicant’s medical condition or disease clearly meets Social Security’s statutory standard for disability. Due to the severe nature of many of these conditions, these claims are often allowed based on medical confirmation of the diagnosis alone. To date, nearly 900,000 people with severe disabilities have been approved through this accelerated, policy-compliant disability process, which now includes a total of 278 conditions.

“The Social Security Administration remains committed to reducing barriers and ensuring people who are eligible for benefits receive them,” said Acting Commissioner Kijakazi. “Our Compassionate Allowances program allows us to reinforce that commitment by expediting the disability application process for people with the most severe disabilities.”

When a person applies for disability benefits, Social Security must obtain medical records in order to make an accurate determination. The agency incorporates leading technology to identify potential Compassionate Allowances cases and make quick decisions. Social Security’s Health IT brings the speed and efficiency of electronic medical records to the disability determination process. With electronic records transmission, Social Security can quickly obtain a claimant’s medical information, review it, and make a faster determination.

For more information about the program, including a list of all Compassionate Allowances conditions, please visit www.ssa.gov/compassionateallowances.

To learn more about Social Security’s Health IT program, please visit www.ssa.gov/hit.

People may apply online for disability benefits by visiting www.ssa.gov.

By law, all taxpayers have the right to finality of tax matters. For example, taxpayers have the right to know when the IRS has finished an audit. This is one of ten basic rights — known collectively as the Taxpayer Bill of Rights.

Here’s what taxpayers should know about their right to finality:

  • Taxpayers have the right to know:
    • The maximum amount of time they have to challenge the IRS’s position.
    • The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt.
    • When the IRS has finished an audit.
  • The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.
  • There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS can assess tax for that tax year at any time.
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. The IRS can’t extend this 10-year period unless the taxpayer agrees to extend the period as part of an installment agreement to pay tax debt or a court judgment allows the IRS to collect unpaid tax after the 10-year period.
  • There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS can’t collect unpaid tax due to the taxpayer’s bankruptcy or there’s an ongoing collection due process proceeding involving the taxpayer.
  • A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.
  • Generally, a taxpayer can be subject to only one audit per tax year. The IRS may reopen an audit for a previous tax year if the agency finds it necessary. This could happen, for example, if a taxpayer files a fraudulent return.

Social Security has provided financial protection for millions of people for nearly 90 years. We pay disability benefits through two programs: the Social Security Disability Insurance (SSDI) program and the Supplemental Security Income (SSI) program. SSDI is for people with disabilities, and certain family members, if they worked long enough and recently enough to be eligible for benefits. SSI is for people who are 65 or older, as well as people of any age, including children, who are blind or have disabilities. To be considered eligible for SSI, you must also have income and resources below specific financial limits.

We are dedicated to supporting veterans at every stage of their journey in life.

Read more here.

WASHINGTON — The Internal Revenue Service today reminded thousands of tax-exempt organizations of their May 15, 2023, filing deadline.

The annual filing due date for certain returns filed by tax-exempt organizations is normally by the 15th day of the 5th month after the end of an organization’s accounting period. Those operating on a calendar-year (CY) basis must file a return by May 15, 2023. Returns due include:

  • Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF)
  • Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ
  • Form 990-T, Exempt Organization Business Income Tax Return (other than certain trusts)
  • Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code

Mandatory electronic filing
Electronic filing provides fast acknowledgement that the IRS has received the return and reduces processing time, making compliance with reporting requirements easier. Note:

  • Organizations filing a Form 990, 990-EZ, 990-PF or 990-T for CY2022 must file their returns electronically.
  • Private foundations filing a Form 4720 for CY 2022 must file the form electronically.
  • Charities and other tax-exempt organizations can file these forms electronically through an IRS Authorized e-File Provider.
  • Organizations eligible to submit Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard) on IRS.gov.

Common errors
The IRS also reminds organizations to submit complete and accurate returns. If an organization’s return is incomplete or the wrong return for the organization, the return will be rejected. Common errors include missing or incomplete schedules.

Extension of time to file
Tax-exempt organizations that need additional time to file beyond the May 15 deadline can request a six-month automatic extension by filing Form 8868, Application for Extension of Time to File an Exempt Organization Return. In situations where tax is due, extending the time for filing a return does not extend the time for paying tax. The IRS encourages organizations requesting an extension to electronically file Form 8868.

Pre-recorded workshops
To help exempt organizations comply with their filing requirements, IRS provides a series of pre-recorded online workshops. These workshops are designed to assist officers, board members and volunteers with the steps they need to take to maintain their tax-exempt status, including filing annual information returns.

WASHINGTON — The Internal Revenue Service today warned taxpayers to watch out for scammers who try to sell or offer help setting up an Online Account on IRS.gov that puts their tax and financial information at risk of identity theft. 

The IRS Online Account provides valuable tax information for people. But this information in the wrong hands can provide important information to help an identity thief try to submit a fraudulent tax return in the person’s name in hopes of getting a big refund. People should watch out for these scam artists offering to help set up these accounts because these are identity theft attempts to run off with the taxpayer’s personal or financial information. 

These third-party online account scams are part of day three of the IRS annual Dirty Dozencampaign. 

“Scammers are coming up with new ways all the time to try to steal information from taxpayers,” said IRS Commissioner Danny Werfel. “An Online Account at IRS.gov can help taxpayers view important details about their tax situation. But scammers are trying to convince people they need help setting up an account. In reality, no help is needed. This is just a scam to obtain valuable and sensitive tax information that scammers will use to try stealing a refund. People should be wary and avoid sharing sensitive personal data over the phone, email or social media to avoid getting caught up in these scams.”

The Dirty Dozen is an annual IRS list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal data and more. Some items on the list are new, and some make a return visit. While the list is not a legal document or a formal listing of agency enforcement priorities, it is intended to alert taxpayers, businesses and tax preparers about scams at large. 

As a member of the Security Summit, the IRS, with state tax agencies and the nation’s tax industry, have taken numerous steps over the last eight years to warn people to watch out for common scams and schemes each tax season, including tax-related identity theft. Along with the Security Summit initiative, the Dirty Dozen aims to protect taxpayers, businesses and the tax system from identity thieves and various hoaxes designed to steal money and information, including this new Online Account scheme. 

IRS Online Account: Steer clear of help from third-party scammers

In this scam targeting individuals, swindlers pose as a “helpful” third party and offer to help create a taxpayer’s IRS Online Account at IRS.gov. People should remember they can set these accounts up themselves. But third parties making these offers will try to steal a taxpayer’s personal information this way. Taxpayers can and should establish their own Online Account through IRS.gov. 

These scammers often ask for the taxpayer’s personal information including address, Social Security number or Individual Taxpayer Identification number (ITIN) and photo identification. The criminal then sells this valuable information to other criminals. They can also use the sensitive information to file fraudulent tax returns, obtain loans and open credit accounts. 

The IRS urges people to watch out for these “helpful” criminals. The only place individuals should go to create an IRS Online Account is IRS.gov. People should not use third-party assistance, other than the approved IRS authentication process through IRS.gov, to create their own IRS online account. 

Help stop fraud and scams

As part of the Dirty Dozen awareness effort, the IRS encourages people to report individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns. 

To report an abusive tax scheme or a tax return preparer, people should mail or fax a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

Internal Revenue Service Lead Development Center

Stop MS5040

24000 Avila Road Laguna Niguel, California 92677-3405

Fax: 877-477-9135

Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary reward. For more information, see Abusive Tax Schemes and Abusive Tax Return Preparers.

WASHINGTON — The Internal Revenue Service today issued a renewed warning urging people to carefully review the Employee Retention Credit (ERC) guidelines before trying to claim the credit as promoters continue pushing ineligible people to file.

The IRS and tax professionals continue to see third parties aggressively promoting these ERC schemes on radio and online. These promoters charge large upfront fees or a fee that is contingent on the amount of the refund. And the promoters may not inform taxpayers that wage deductions claimed on the business’ federal income tax return must be reduced by the amount of the credit.

“While this is a legitimate credit that has provided a financial lifeline to millions of businesses, there continue to be promoters who aggressively mislead people and businesses into thinking they can claim these credits,” said Acting IRS Commissioner Doug O’Donnell. “Anyone who is considering claiming this credit needs to carefully review the guidelines. If the tax professional they’re using raises questions about the accuracy of the Employee Retention Credit claim, people should listen to their advice. The IRS is actively auditing and conducting criminal investigations related to these false claims. People need to think twice before claiming this.”

The IRS has been warning about this scheme since last fall, but there continue to be attempts to claim the ERC during the 2023 tax filing season. Tax professionals note they continue to be pressured by people wanting to claim credits improperly. The IRS Office of Professional Responsibility is working on additional guidance for the tax professional community that will be available in the near future.

People and businesses can avoid this scheme, and by not filing improper claims in the first place. If the business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credit, the business should file an amended income tax return to correct any overstated wage deduction.

Businesses should be cautious of advertised schemes and direct solicitations promising tax savings that are too good to be true. Taxpayers are always responsible for the information reported on their tax returns. Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.

What is the ERC?
The ERC is a refundable tax credit designed for businesses who continued paying employees while shut down due to the COVID-19 pandemic or who had significant declines in gross receipts from March 13, 2020, to Dec. 31, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period within those dates.

To be eligible for the ERC, employers must have:

As a reminder, only recovery startup businesses are eligible for the ERC in the fourth quarter of 2021. Additionally, for any quarter, eligible employers cannot claim the ERC on wages that were reported as payroll costs in obtaining PPP loan forgiveness or that were used to claim certain other tax credits.

To report tax-related illegal activities relating to ERC claims, submit by fax or mail a completed Form 14242, Report Suspected Abusive Tax Promotions or Preparers and any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail: Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405
Fax: 877-477-9135

Employers should also report instances of fraud and IRS-related phishing attempts to the IRS at phishing@irs.gov and Treasury Inspector General for Tax Administration at 800-366-4484.

Go to IRS.gov to learn more about eligibility requirements and how to claim the Employee Retention Credit:

Additional Information

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