Why am I getting calls about the Employee Retention Credit (ERC)?
You've likely encountered those spam calls from unfamiliar numbers, accompanied by voicemails claiming you can receive substantial government pandemic relief for owning a business. They entice you with promises of up to $26,000 per employee.
The voice is unfamiliar, the name unknown, and all you hear is a vague promise of something for nothing. It might seem like a fantastic opportunity since $26,000 per employee can amount to a significant sum. However, how can you ascertain its legitimacy?
Distinguishing between trustworthy vendors and shady ones requires careful consideration and asking the right questions. Here's our advice: start by probing and seek satisfactory answers.
When collaborating with ERC specialists who handle your filings, it's crucial to inquire about their experience. While the ERC program is relatively new and has undergone changes, the vendor you choose should possess a comprehensive background in accounting and tax policies. They should also provide examples of businesses and industries they have worked with, along with testimonials from contented clients. We will delve into this further later.
Establishing and verifying your eligibility for the ERC benefit is perhaps the most critical aspect of the process. If it later emerges that you were ineligible or your eligibility is questioned, it can lead to significant issues. We acknowledge the importance of this aspect and dedicate appropriate time and effort to help you determine if you qualify for the program.
Legitimate ERC providers inform their clients about the need to account for the ERC on their income taxes. They should advise you to inform your CPA or tax preparer when you receive your checks. As per the IRS memo IR-2022-193, dated October 19, 2022, "If the business filed an income tax return deducting eligible 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."
ERC Fees and Agreements
The fees charged by companies for ERC filings can vary significantly from 15% to 30%. However, one warning sign with an ERC vendor is upfront fees demanded BEFORE any ERC analysis. If a company promises substantial refunds and requires payment and contract signing before conducting any analysis or discovering details about your company, it raises a red flag. Reputable ERC vendors perform the necessary work FIRST, allowing business owners to learn the amount of their ERC credits before making payments or signing agreements.
The ERC is a federal program that involves communication and filings with the IRS. For seasoned experts who have successfully guided numerous clients through the process, it might not be overly burdensome. However, independent business owners and vendors lacking such experience may struggle to keep up with all the required IRS notices and revenue reporting procedures. If you ask, the vendor you consider should provide a detailed, step-by-step explanation of everything demanded by the IRS, what is required of you, and estimated timelines and deadlines. You don't want any surprises while navigating this process. In fact, we have witnessed many customers whose accounting departments and external accounting firms have recommended working with an ERC expert precisely due to these reasons.
Have You Received PPP Funds?
ERC eligibility was recently modified to allow businesses that filed for and received PPP funds to also benefit from this program. However, accounting for these businesses, though not difficult, requires specificity. PPP wages are excluded from consideration under the ERC program, and any vendor you consider should be aware of this and capable of providing a detailed explanation.
Interacting with the IRS
Inquire with the vendors you are considering, posing questions such as: "What happens if...?" What if the IRS audits your ERC application? What if the IRS requests additional information? What if, months or even later, the IRS wants to review the original documentation? A reputable vendor should be able to commit to:
Maintaining all necessary documentation for the required periods.
Being available to communicate or meet with the IRS on your behalf, if needed.
Providing answers to any questions even after the application is approved and funds are received.
Essentially, your ERC vendor should stand fully behind their own work.
Your vendor should not only supply you with positive reviews and testimonials from satisfied clients but should also be enthusiastic about receiving such inquiries. If a vendor hesitates or avoids providing this information, it could be a sign of dubious practices. We all gladly share success stories in our respective industries, and your vendor should be no exception.
These are just a few of the questions you should ask before entrusting an ERC expert with your application and filing. Don't hesitate to inquire, and don't ignore any doubts if they cannot provide satisfactory answers and evidence.
By adopting this approach, you will set yourself up for a positive start to the ERC process. Contact us today for your complementary ERC estimate from our CPA. There's no upfront fees for our ERC filing service.