It is crucial for business owners to exercise caution when it comes to the Employee Retention Tax Credit (ERC) and the services offered by third-party companies. While there are legitimate firms that can assist with ERC calculations, there are also those who may engage in fraudulent activities or misinterpret the eligibility rules. Here are some additional examples to be careful about:
- Promises of guaranteed eligibility: If a company guarantees that you are eligible for the ERC without properly evaluating your specific situation, it could be a red flag. Eligibility for the credit depends on various factors, including the impact of COVID-19 on your business and meeting specific requirements. Each case needs to be assessed individually.
- Excessive fees or large percentages: Be cautious of companies that charge exorbitant fees or demand a significant portion of the tax credit as their compensation. While it is reasonable to pay for professional services, be wary of companies seeking an unreasonably high percentage of the credit.
- Aggressive interpretation of the rules: Some firms may exploit the lack of clarity in the ERC rules to maximize the credit for their clients. However, it's important to note that the IRS provides guidelines on eligibility and calculations. Companies taking overly liberal interpretations of the rules may put you at risk of an IRS audit or penalties if the claims are found to be incorrect
- Lack of transparency or documentation: When engaging with a company offering ERC calculation services, ensure they provide clear documentation and explanations of their methods and calculations. Transparency is crucial in understanding how the credit is determined and ensuring compliance with IRS guidelines.
- Unsolicited offers or pressure tactics: Be cautious of unsolicited offers from companies claiming to assist with ERC calculations. Legitimate firms typically do not reach out to businesses unsolicited. Additionally, if a company uses high-pressure tactics or creates a sense of urgency to secure your business, it's wise to approach with caution.
To protect yourself and your business, it's advisable to work with reputable tax advisors or accounting professionals who have expertise in the ERC and a track record of providing reliable services. Your Beaird Harris tax advisor is already evaluating your eligibility, which is a positive step. If you have any concerns or questions, it's best to consult with them directly.
I recommend that you click on this link to find information on the Employee Retention Credit, including information on how to calculate the credit and how to claim it on your tax return. To begin your ERC or have questions click below
