Salt Lake City, Utah – It has been a few weeks since I have posted about the ERC or any tax topic for that matter. Any free time that I have had over the last few weeks has been spent with my youngest son, Andrew. Last Wednesday, Salli and I dropped off our son, Andrew, at the Mission Training Center in Provo, Utah, where Andrew will prepare to serve a Mission for the Church of Jesus Christ of Latter-day Saints in Papeete Tahiti. So, while I am thrilled to see him go and live and serve among the people of Tahiti, it has been a rough couple of weeks for Salli and me personally to see him go.
With that side note, I want to get back to the ERC and the trends that we are seeing from the IRS. In recent posts, I have discussed the ERC and that the IRS has aggressively stepped-up auditing taxpaying business owners who have applied for and received payments related to the ERC. One of the trends that we currently see is that most taxpayers do not have adequate documentation to substantiate a claim. This lack of documentation is based on work performed by an ERC-mill and the taxpayer failing to perform its own due diligence necessary to support the ERC qualification. When a taxpayer signs IRS Form 941 X, the taxpayer makes the following representations:
Under penalties of perjury, I declare that I have filed an original Form 941 or Form 941-SS and that I have examined this adjusted return or claim, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
What we are seeing is that the taxpayer may have general information about a government shutdown that “may have” had an impact on the taxpayer, but the taxpayer really does not know if the partial shutdown had an impact on the taxpayer’s bottom line. This failure to know flies in the face of the representation made by the taxpayer as it relates to the taxpayer’s best knowledge and belief. So, if there is no documentation, the field agent will refer the case to Criminal to look at perjury possibilities. Remember, the IRS is not going to do the work for you, the taxpayer has the burden of proof to show that it was eligible for the ERC, and it is up to the taxpayer to justify the amount of the ERC. If the refunded ERC amount is large enough, we have seen the IRS Criminal Investigation Unit get involved. For more information go to: https://www.irs.gov/compliance/criminal-investigation/about-criminal-investigation.
I hope that through these posts and blogs that anyone who reads what I have to say will be wary of ERC mills promising full eligibility with little substantiation. I encourage any taxpayer taking an ERC position that is not deeply relying on social distancing, enhanced sanitation and hygiene procedures, or alterations to the change in format of their service, to exercise heightened care and discretion in pursuing a claim. If you or someone you know are claiming the ERC, or intends to claim the ERC, please make sure to understand who is performing the work, what is being claimed, and what you, the taxpayer, is expected to get in return.
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/
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