Do they even lift, bro?
Companies offering Employee Retention Credit services have been increasingly imposing a HEAVY burden of work and responsibility on their clients. Let's talk about a further instance of confusion, for which the Internal Revenue Service has issued a warning to taxpayers surrounding the Employee Retention Credit.
But first, for a little background, here’s a quick rundown of the heavy-lifting process to claim the ERC:
- Determine legal eligibility.
- Calculate the credit.
- Prepare amended quarterly payroll tax returns and send them to the IRS.
Why does the Employee Retention Credit require heavy lifting?
The calculation portion of the ERC is complicated!
We must consider applicable wages by eligible employees by quarter, extrapolate any wages paid with forgiven PPP funds, and remove any other wages associated with conflicting federal incentives (such as R&D Tax Credits, WOTC, FMLA, and more.)
However, some Employee Retention Credit “firms” are placing a HEAVY workload on their clients. They want YOU to do your own calculation. They will send you a massive spreadsheet for you to enter your wage data. That means you must interpret your own payroll reports, verify the wages you enter, and put the numbers in the right cells. This pushes much of the heavy lifting onto you.
- Do you know the rules about what wages can and cannot be used?
- Have you digested the FAQs about excluding certain related employees?
- Do you understand which health plan expenses to include?
- Have you read the Large Employer/Small Employer rules related to wages?
Maybe you do, and that’s awesome! But more likely than not, you haven’t had time to absorb the 150+ pages of law and subsequent IRS memos about the ERC.
There is usually a tiny note in the spreadsheet that the client must verify the accuracy of the data they input and that the credit is calculated correctly, as the paid provider isn’t going to do that. Sometimes you are advised to “consult a tax professional or your CPA”.
"Businesses should be wary of advertised schemes and direct solicitations promising tax savings that are too good to be true," Werfel said. "They should listen to the advice of their trusted tax professional. Taxpayers should remember that they are always responsible for the information reported on their tax returns. Improperly claiming this credit could result in taxpayers having to repay the credit along with potential penalties and interest."
This is what we've trained for!
Take it easy with the weights! Tax Credit Collective is here to do all the heavy lifting with the ERC.
If one keystroke is all it takes to get an Excel formula wrong, and if you are doing the heavy lifting yourself, AND if the provider bears no responsibility to verify the data and calculations, what exactly are you paying them for? In some cases, the provider will not give a determination of eligibility NOR will they calculate the credit. So all you are receiving is their service to amend your payroll tax returns.
Our firm's goal is to help our clients confidently claim the Employee Retention Credit without them doing the heavy lifting.
Source: 2023 IRS Dirty Dozen