If you are like me you are getting phone calls and emails daily with somebody trying to tell you that you qualify for the Employee Retention Credit or ERC or that you could get up to 26,000 per employee. They go as far as saying that time is running out to file.
Lucky for me I know the rules to ERC and when I actually do answer one of their calls they don’t always seem happy to talk to me. In fact, I was hung up on once for asking too many questions. This is what worries me for my clients or the average business owner. I know what questions to ask but most people are too busy running their business to have time to study the rules for this credit. Unfortunately, this is where business owners can get in trouble.
These companies that push to get you to file for the ERC have become so overwhelming that the IRS is now issuing warnings. They are billing unethically and filing credits for businesses that do not qualify. As an accountant, I’ve known since college (which was longer ago than I like to admit) that it is unethical to bill based on the outcome of a return. This is because it could create a conflict of interest for the accountant. Many of these companies are doing just that!
Most of these companies were organized only to file for the ERC. They will not be around in 2 or 3 years when the IRS decides it wants its money back because the claim for the credit is not allowed. While many are not local companies some are, but being local doesn’t make them any better or more ethical.
The issue is that they are billing a percentage of the outcome — which means it is in their best interest to file as big of a claim as they can even if you don’t qualify. The typically 10% is due up front, and they don’t care if you actually get the money from the IRS. Nor do they have any guarantees they will be in business years later to represent you should the IRS say you don’t qualify. In fact, many of these companies can’t even provide the business owner with the support that shows how they qualified the business for the credit.
My intention is not to tell you if you do or don’t qualify or even give you a bunch of boring rules to study but rather to help you understand how important it is that you go to your trusted accountant to find out if you qualify. Work with the professionals you have been working with or reputable accountants in your area.
As an accountant, I want my business owners to succeed and if we can get them help to do that with this credit, great. However, I want longterm success for both of us. I don’t want them to get notices in 3 years that say they owe the money back, nor do I want the preparer penalties for filing false claims. Your regular reputable accountant would consider the same things we do, so turn to them for advice on this.
Not to mention it will save you accounting fees as most accountants offering this to their clients, bill by the hour or a flat fee based on number of employees but don’t consume your refund in the manner unethical companies are.
Things to ask if you are working with somebody new to file for the credit:
- How do they determine fees? If it is a percentage of the refund go elsewhere.
- When was the business created? If created in 2020 or later be skeptical.
- Does the business do any other accounting work besides ERC filings? If no, find another provider it means they won’t be in business once the filings are completed.
- Do they have any accountants on staff or are the employees just trained on ERC? If just ERC again just like above they most likely won’t be in business in a few years.
- Do they provide details about how they determined your business qualifies so you have it for your records? If not go elsewhere.
- Do they have any guarantees with their work and will they be able to represent you with the IRS should the filing not qualify? If no find another provider. In the case of my calls, they like to skirt around the question — make them answer it.
I understand many people see this credit similar to the Paycheck Protection Program (PPP) when most businesses qualified. That is NOT the case with this credit and there are consequences to getting money you aren’t qualified for. Keep that in mind as you look for a provider and ask questions to make sure they are providing quality work that is in your best interest.
The Wassman CPA Services website and blog is meant to offer general information to our readers. The information provided is not intended to replace or serve as a substitute for any accounting, tax or other professional advice, consultation or service. You should contact Wassman CPA Services for advice concerning specific matters prior to making any decisions.
