Feb 2024 ERC Update

Due to technical difficulties with the GoToWebinar platform (audio), we were forced to shorten the presentation. However, before terminating the broadcast, Jason Silver, Attorney for Silver Law PLC, explained the correspondence and notices surrounding the Voluntary Disclosure Plan (VDP). It is important for you to understand this program, but it is the considered opinion of our legal and accounting network that the VDP poses an unreasonable risk to our clients (you).  It requires you to admit wrongful submission and could be used against you in future IRS action.  If you are considering taking the VDP path to resend your claim to the ERC refund for which you filed, we advise you to consult with us and your own tax professionals.

Also, Mr. Silver presented the seven points for self-evaluation of eligibility presented in the recent IRS Announcement dated February 13, 2024, (link). It stresses that businesses align their eligibility considerations closely to seven points.  The principal one is that you paid W2 wages to employees during the periods identified by CARE, and another is that you did not exceed the defined amounts for these periods.  It referenced other key points that prompted questions from many attendees.  We cover those specifically in the FAQ below.  However, the biggest question on everyone’s mind is: Am I eligible? 

Section 2301 of the CARES Act expressly provides two possible ways that a small business may be eligible for the ERC:
1) reduction in revenues and
2) if your business/charity has had a more than nominal impact due to federal, state, local government or regulatory COVID orders (easy example, think of occupancy, spacing, cleaning, and requirements as just a start of a long list). You are the best judge of how your business operations were impacted, and in fact, in a Forbes article that was published in the February 15, 2022, edition (link), Sean Zerbe quoted IRS management saying that “…70% of small and medium businesses and non-profits were good candidates for taking the ERC. 
That continues to be our position regarding business eligibility.

The issue of amending returns has also become somewhat of a thorny issue for several reasons: 

1) the concern of penalties to CPAs;
2) what to do when not all ERC refund checks have been received; and
3) what information must you (or your tax professional) provide as part of the amended tax return.

  1. CPAs have been told by the IRS and their own authoritative body, the AICPA, that they may be subject to harsh penalties because of the ERC. As noted above, we do not believe the IRS has the authority to change the rules laid out in the CARES Act as passed by Congress and signed into law by not one but both Presidents Trump and Biden (i.e., from both parties). 
  2. If you haven’t received all of your ERC refund checks, the question arises as to whether you must amend your business and personal income tax returns until or unless you do. While the IRS is instructing tax professionals they must file the amended income tax returns for 2020 by March 15 due to the 3-year Statute of Limitations, if you never receive the money claimed, you may not be able to request a refund; although we note there is a provision called a “Protective Claim of Refund” that may resolve that problem at least in some cases.
  3. Because of concerns tax professionals have expressed about possible sanctions, they often request supporting documentation to:
    a) “prove” their client was eligible;
    b) check to confirm the calculations that led to the ERC refunds claimed via Forms 941-X were accurate and all eligibility issues (e.g., PPP Loan forgiveness; ineligibility of greater than 50% owners and their family members; limitation of 50% of up to a maximum total of $10,000 per employee for the entire period including the three eligible quarters of 2020, and 70% up to a maximum of $10,000 for each of the three eligible quarters of 2021; and that all applicable Forms 941 as originally filed match both the refund amounts claimed, and the Forms W-2 filed with the Social Security Administration).

We agree that tax professionals and their clients should check the calculations, which we readily make available in what we call a “Beta File.” However, there is no meaningful way to express eligibility other than to respond to any inquiries as IRS may issue. We advise clients to consult with their tax professionals on these matters as well.

Our primary purpose in conducting this webinar was to allay your fears by stating that if you paid W2 wages during the identified periods and did not over-calculate your refund, and your opinion is that you are eligible, then you are within your rights to request this refund for your business.  If you believe you were impacted by the COVID-related government mandates in a more than nominal way you are within the states eligibility rules covered in Section 2301. If you provided us with accurate data, then your calculations are correct!  The whole reason for the CARES Act, and – in our considered opinion, the Act did its job to “jump start” the economy. Therefore, it also was not a crime for you to have filed for the Employee Retention Tax Credit when you did, in fact, employ people at considerable expense to your business during the time periods identified in the CARES Act.

Frequently Asked Questions (FAQ):

  1. What do I need to do now?
    There is nothing more to do other than amending your business and personal income tax returns. No other action is required at this time, although the VDP option – however we deem it inadvisable – remains up to you and your tax professionals.
  2. Is the ERC program still active? 
    Yes, we continue to monitor and make inquiries to the IRS on the processing of those ERC refund checks that have yet to be issued.
  3. Is there a recording? 
    Unfortunately, due to technical issues, there is currently no recording available. 
  4. Was there an error with my ERC?  Is that why we did this webinar
    No, this webinar was intended strictly for informational purposes…nothing more.
  5. If I receive a letter from the IRS regarding the ERC, should I contact you?
    Yes! Please notify us immediately upon receiving any communication from the IRS related to the ERC so that we can provide the necessary support.
  6. How long do I have to wait?
    It could be another three or four months and possibly longer. We will continue to support your claim, both before you receive the checks and after you receive your refunds.
  7. What can I do to expedite the process?
    We can schedule a call with the IRS, although they likely will not provide an expected date.
  8. 3. Why is it taking so long?

    The IRS audits all claims before sending checks. Further, it has been severely understaffed for quite some time due to budget cuts. Their first priority is processing tax returns, auditing returns, and providing general customer service to taxpayers. The ERC placed a further strain on scant resources, so the IRS Commissioner imposed a moratorium on September 14, 2023, imposing further delays in processing times.

In conclusion, we wish to thank you for placing your trust in us to process your ERC claims.
Please be assured we remain dedicated to supporting your ERC claims, even in the unlikely event yours is selected for examination.

As always, please feel free to send us your questions and concerns, and we will do our best to respond.

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