IRS OFFERS A WITHDRAWAL OPTION TO BUSINESSES THAT CLAIMED ERTCS
Numerous businesses are coming under fire for receiving an Employee Retention Tax Credit (ERTC) through an invalid application. Yet many of them were under the assumption that they did indeed qualify at the time of applying.
415 Group director Todd Ruggles, CPA, explains why so many businesses were led astray and how they can rectify the matter.
For a lot of businesses who applied for the Employee Retention Tax Credit, they may have applied without being fully aware of all the requirements needed for a complete and accurate application. Many third-party providers reached out to businesses saying they qualified, when in fact they didn’t, or the providers didn’t have the experience to correctly file for them.
The IRS became increasingly aware of this and is offering the ability to withdraw unprocessed claims that don’t qualify. Then, if the business does in fact qualify, they can re-file with the appropriate information while the statutes for those periods remain open.
However, many businesses are unfortunately learning that they never qualified in the first place as more guidance has come from the IRS. Certain third-party providers may have charged taxpayers for calculating the credits without providing the required documentation and support to justify the refunds received
If the ERTC application is reviewed by the IRS and found to be insufficient, a business will likely have to pay back the tax credit itself. They may also be subject to interest and penalties. The repercussions can start to stack up and become overwhelming.
The ERTC is one of the newer areas in the tax code without substantial guidance, so it can be difficult to tell if you legitimately qualify, especially if a taxpayer is filing under the suspension of business operations test. It’s wise to work with a trusted advisor to get a second opinion if you’ve already applied. They will be able to work with you on potential qualification and advise on next steps.
At 415 Group, we help our clients to have a good perspective on whether or not they qualify for ERTC and other credits. We want them to be able to make the determination up front as to whether or not they qualify. Even though the moratorium (explained in the main article below) has yet to be lifted, we are assisting those with valid claims to ensure they receive the credit. If they do, we then guide them through the application process. Furthermore, we can assist with the withdrawal process.
Even though there is a lot of controversy surrounding the ERTC, legitimate claims should still be pursued. It’s important that if you’re claiming a credit now or in the future, you have the right team behind you with the right documentation to support your claim.
If you’re wondering if your business qualifies for the Employee Retention Tax Credit or you have questions on withdrawing your claim and potentially reapplying, reach out to 415 Group today.