IRS Warns Businesses About Schemes Promising Inflated ERC Returns

The IRS is warning business owners about scams perpetrated by third parties claiming that employers are eligible for large employment tax refunds generated by improperly claiming or overstating the employee retention credit (ERC). According to the IRS, these third parties typically charge a large fee or may require a percentage of the tax refund generated by the amended return. While it’s possible that some business owners do legitimately qualify for a refund, many do not. Similarly, the business owner must remember that if the business files an amended return, they must also reduce the wage deductions they took on their tax return based on the amount of the ERC that is claimed on the amended return. In most cases, the third party offers to prepare an amended return that either improperly determines that the business is eligible for the ERC or overstates the amount of the credit available. Business owners should closely examine the qualification requirements and their individual circumstances before filing an amended return to claim the ERC. Employers must either satisfy the governmental order test or the gross receipts test to claim the credit. For more information on the ERC, visit Tax Facts Online. : Q . Note: Q is updated.