The Internal Revenue Service has announced a new plan to assist small business owners who mistakenly claimed the employee retention credit (ERC).
The ERC was originally implemented during the COVID pandemic to help small business owners keep employees on payroll despite reduced revenue. Well after the government ceased other pandemic-related handouts, the IRS continued to allow companies to claim the tax credit retroactively for years 2020 and 2021 by filing an adjusted return.
Earlier this year, the agency warned of a new scam that used the ERC to catch unwary small business owners. According to the IRS, fraudsters, often under the guise of marketers, were contacting companies to tell them they may qualify for the ERC and could receive potentially thousands in government assistance. In return, the scammer would typically require a fee to “confirm” the company’s eligibility or to ensure the IRS processed the claim in a timely manner. Falsely claiming the ERC can result in repayment and fines. Although the agency urged businesses to only work with verifiable tax experts, so many were affected by the scam that, in September, the agency announced it would stop accepting ERC claims until it could devise an appropriate countermeasure.
Now, the tax administration says it has created a “special withdrawal process” for small business owners who fell prey to these scams, one that could avoid penalties and repayment costs. “The aggressive marketing of these schemes has harmed well-meaning businesses and organizations, and some are having second thoughts about their claims,” commented IRS commissioner Danny Werfel. “We want to give these taxpayers a way out.” The process is only available to companies that submitted an adjusted tax return for the sole purpose of claiming the tax credit and have not received or deposited an ERC refund.
To read more about the new ERC withdrawal process, visit the IRS website at IRS.gov/withdrawmyERC.
Small Business News, Articles