Salt Lake City, Utah - In my last Blog I discussed ERC Insurance options in protecting yourself in the event of a problem with an ERC Claim. Today, I want to discuss what could happen if you an ERC Claim problem.
Currently if a taxpayer is making an ERC Claim, the taxpayer is amending its past payroll tax returns to claim the ERC. What we are seeing is that some of the ERC Claims being made are valid claims, some of the ERC Claims are filed by and ERC Mill and would be considered abusive, and in certain situations, some ERC Claims are just plain fraudulent. Over the next few posts, I am going to outline what we are seeing when it comes to problematic amended payroll tax returns:
- The taxpayer amends the business’s payroll tax return for 2020 and 2021 – Note: in a previous blog post I mentioned that the most problematic quarter for the ERC is the 3rd quarter of 2021.
- The IRS then refunds the ERC amount claimed – Note: this was the goal and so the taxpayer feels good about the steps taken and the successful result.
- The ERC claim company takes its cut – we are seeing percentages from anywhere between 5% to 30%.
- The Taxpayer then goes back to its CPA to amend the business returns to reduce the claimed wages by the amount of the ERC credit, thereby increasing the net profit or reducing the net loss that flows through the business for 2020 and/or 2021.
- The business owner of the Taxpayer then goes back to his or her CPA to amend his or her 1040 returns for 2020 and/or 2021 and then determines the additional taxes The business owner of course pays that tax.
Let’s stop here. If you are a taxpayer who has received the ERC, did you number one, amend the businesses tax return, and number two, did you amend your individual tax return. What we are hearing from taxpayers is that the ERC claim company did not instruct the taxpayer that these were two steps where necessary in making the ERC Claim and that when the taxpayer is successful in claiming the ERC, there could possibly be tax liabilities elsewhere. In my next Blog I will provide the remaining issues that we have seen when taxpayers have claimed the ERC and the tax problems associated with the taxpayer’s claim.
Tax problems are legal problems, and we solve both. If you or someone you know has an issue with paying their federal or state taxes and needs help to end their IRS nightmare, please contact Kent Brown at Strong & Hanni by either phone at (801) 532-7080 or email at: kbrown@strongandhanni.com or go to https://activerain.com/profile/kbrowndad for additional information, or my personal Strong & Hanni webpage at: https://strongandhanni.com/attorneys/attorney-kent-brown/
Note: I have been asked if I assist taxpayers in making a claim for the ERC. I do not, what I do is assist taxpayers when they have issues with the IRS, both civil issues as well as criminal issues.
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