The Employee Retention Tax Credit (ERTC) was devised during the pandemic to provide financial relief to businesses and nonprofit organizations that continued paying employees while shut down due to COVID-19 or that had a significant decline in gross receipts during the pandemic.

Even though we are more than two years past the end of the ERTC eligibility period, aggressive promoters are trying to convince organizations that they can still file for the credit, even if they are not eligible. According to the IRS, these promoters are “wildly misrepresenting and exaggerating who can qualify for the credits.” The IRS is scrutinizing ERTC claims more closely because of these aggressive promoters.

The ERTC is a legitimate tax credit that qualifying organizations can claim by filing an amended Form 941. However, there are specific eligibility criteria for claiming the credit. The organization must have:

  • Sustained a full or partial suspension of operations due to orders from a government authority because of COVID-19 during 2020 or the first three quarters of 2021

  • Experienced a significant decline in gross receipts during 2020 or the first three quarters of 2021

  • Qualified as a recovery startup business for the third or fourth quarter of 2021

    Unscrupulous promoters are lying about eligibility requirements, leaving out key details or making broad arguments suggesting that all employers are eligible for the credit. Their aggressive marketing tactics have appeared online, in TV and radio commercials, and in direct mail in the form of letters made to look like official IRS correspondence.

    Any organization that claims the ERTC improperly must repay the money, possibly with penalties and interest. According to the IRS, the best way to protect your organization is to work with a trusted tax professional and not rely on the advice of an unsolicited third-party promoter.

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