The IRS recently announced major changes that signal a pivot in its Employee Retention Credit (ERC) compliance efforts. According to IR-2023-135, the IRS is ramping up scrutiny of questionable ERC claims and cracking down on fraud connected to aggressive marketing tactics.
What do these changes mean for business owners and tax professionals like you? In this blog post, we’ll summarize the key points from the IRS’ July 2023 update. We’ll outline potential pitfalls to avoid and provide you with actionable advice to safeguard your business amid this shifting tax landscape.
What the IRS ERC Crackdown Means for Your Business
The Employee Retention Credit has thrown struggling businesses a critical lifeline throughout the pandemic. But IRS Commissioner Danny Werfel recently indicated that the landscape is shifting.
With the backlog of valid ERC claims now cleared, the IRS is pivoting to a renewed focus on compliance and implementing additional safeguards against fraudulent claims.
What exactly does this change in strategy entail? Here are the key implications:
- More audits and investigations: Both shady promoters and businesses submitting questionable claims will face increased scrutiny. The IRS is ramping up audits and criminal probes related to ERC abuse.
- Drop in legitimate claims: Per Werfel, the percentage of valid ERC claims has decreased, while suspicious claims driven by misleading marketing pitches have risen.
- Concerns over scams and ads: Aggressive ERC marketing tactics—including unsolicited calls, exorbitant upfront fees and inflated eligibility promises—have alarmed the IRS and led to a crackdown on program fraud.
- Warning signs to watch for: The IRS has identified red flags indicating potentially abusive ERC marketing. These range from “too good to be true” eligibility claims to high-pressure sales tactics. See the full list of signs to watch for in the IRS release.
Staying Compliant With the ERC: Tips for Your Business
With the IRS tightening requirements around the Employee Retention Credit, you may feel unsure of how to achieve full compliance. Don’t worry—following some common-sense best practices can help safeguard your ERC claim:
- Verify eligibility thoroughly: Before claiming any credits, undergo a comprehensive qualification assessment based on the latest IRS criteria. At ETS, we offer detailed eligibility analyses tailored to your specific situation.
- Document everything: Maintain meticulous records of financials, headcounts, COVID-19 impacts and more. ETS can assist with assembling a complete paper trail to back your ERC claim.
- Avoid sketchy sales tactics: Steer clear of ERC promoters making inflated promises or pushing overly aggressive marketing schemes. Instead, rely on trusted guidance from reputable experts.
- Consult knowledgeable advisors: Lean on specialists like the ETS team to guide you through the changing ERC landscape. We provide personalized support that aligns with the most up-to-date IRS guidelines.
Let ETS Guide You Through the Evolving ERC Landscape
The IRS has made it clear: we've entered a new era for Employee Retention Credits. With rising scrutiny of claims, it's essential to have knowledgeable experts in your corner.
Yet with so much changing, you may feel unsure where to turn or who to trust. Fortunately, you don't have to figure all this out alone.
At Engineered Tax Services, we don't pretend there are any quick fixes or easy answers when it comes to the complex ERC process. We're tax experts who keep up with every nuance of the latest IRS updates and guidance. You can trust our dedicated team to take a conservative approach that protects your business from compliance risks down the road while still maximizing your present tax benefits.
In uncertain times like these, having the expertise of ETS by your side lets you access the credits your business deserves while giving you confidence that your claim can withstand intensifying IRS scrutiny. Reach out for a free consultation today to learn more about how we can help your company navigate the changing ERC landscape.