Pop-up companies aggressively pushing a small business tax credit may soon be in hot water with the IRS.
"I agree with that completely," Michael Sardar, tax controversy attorney and partner at Kostelanetz LLP, said. "I am certain they are working on ERC criminal cases and I'm certain they will bring criminal cases."The ERC is a legitimate tax credit established to help businesses with the cost of keeping staff employed during the pandemic, enacted by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.
"You can have all sorts of losses, but unless it's tied to a government action that caused it, you don't qualify for the ERC," Sardar said, " where a lot of the mistakes happened, some of which were just innocent mistakes and some of which were fraudulent mistakes." "While I can't speak to the process of others in the space, the IRS is right to address those that have not taken a data-driven and compliant approach. I am disappointed that there are companies using the complexity of this tax incentive to prey on deserving small businesses," Howard Makler, CEO of Innovation Refunds, told Yahoo Finance.Makler also detailed how his company uses tax attorneys to analyze documents from small businesses when deciding eligibility.
While the IRS has directed its concerns toward the ERC mills, small business owners that relied on their services unfortunately will be caught up in the middle. For most, who innocently trusted these ERC mills, they will need to return any amounts for the credit they didn’t qualify for.for repayment for any small business owners who got "an improper ERC payment." The agency plans to release more details on that program soon.
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