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In a recent update, the IRS has highlighted new warning signs businesses should be aware of when filing for the Employee Retention Credit (ERC). As this credit becomes increasingly scrutinized, it’s vital for businesses to ensure their claims are accurate to avoid potential penalties, interest, or audits.
The IRS has identified five additional warning signs that have been frequently observed in incorrect ERC claims. These issues add to the previously highlighted areas of concern, bringing the total to twelve common mistakes businesses should be vigilant about.
Businesses with pending or approved ERC claims should review their filings carefully. Confirm eligibility and ensure that the claims do not include any of these red flags. Consulting a trusted tax professional is advisable to verify the accuracy of the claims and to consider participating in the special ERC Withdrawal Program if necessary. This program can help businesses avoid future complications by retracting erroneous claims before they are processed.
For those businesses considering applying for the ERC, it’s equally important to take these steps beforehand. The IRS is increasing efforts to identify and address improper claims, which could lead to audits, repayment of the credit, and additional penalties.
The IRS’s recent announcement aims to give businesses and tax professionals ample time to prepare for upcoming measures to counteract incorrect ERC claims. This includes new compliance initiatives targeting high-risk claims and the reopening of the Voluntary Disclosure Program for a limited time. The agency also plans to expedite the processing of legitimate, low-risk claims to support eligible businesses.
As IRS Commissioner Danny Werfel stated, “The IRS continues to work aggressively to pursue improper claims and ensure that payments go to businesses with legitimate claims on these complex credits.” The IRS emphasizes the importance of consulting a qualified tax professional rather than relying on promoters to avoid misleading advice and potential issues.
In addition to these new signs, the IRS continues to remind businesses of previously identified issues, such as claiming for too many quarters, misinterpreting government orders, and using the same wages across multiple tax periods.
For businesses that have identified potential errors in their ERC claims, the IRS offers options for correction. The ERC Withdrawal Program allows businesses to withdraw unprocessed claims without penalty. Alternatively, businesses can amend their returns to correct overclaimed amounts.
Stay informed and proactive to ensure compliance and avoid unnecessary penalties. For personalized assistance and guidance on navigating the complexities of the ERC, consider reaching out to Honest Accounting Group. Our team is here to help you ensure your business’s financial health and compliance.
