 Internal Revengers IRS tax news IRS issues renewed warnings on employee retention credit claims false claims generate compliance risk for people and businesses claiming credit improperly and you thought the warnings were dead but no the warning has been revived and is now renewed like the evil Emperor Palpatine and like Star Wars in fact if you misinterpret just one of the many complicated tax code changes during the pandemic you're just as bad as that like that horn shirtless bear hide wearing face painted dude that rated the capital building on January 6 that guy was terrifying like some crazed wild viking slash Nazi armed to the teeth hatch it in hand ready to take the scalp of any police officer who dared to step in his way attempting to stop the violent and bloody rampage it's totally it's totally just like the action that like a berserker would do in the middle of a of a mindless violent and out of control episode like Logan bloody nine fingers from those books by Joe Abercrombie or whatever his name is you know I'll tell you what you know don't give me that crap that you just forgot to carry the one on step 376 of the 2179 step tax worksheet you maniac really did it your miscalculation put not only this country at grave risk but also just one thin hairs breath away from causing like mass extinction of the human population over the entire world there is no exaggeration here this is not hyperbole one hairs breath away I tell you now if you would excuse me all this talking about hairs breath has made me hungry for some carrot cake but honestly like if you can't even fill out the 2179 step new tax form correctly you deserve to be frog marched through the swamp on display like some kind of animal we demand high levels of mental competency from every citizen at every level in this country dang it is calling for mental competency tests for those politicians over the age of 75 what do you think about that ridiculous would your husband ever take one of those I mean we haven't even discussed we would never even discuss something like that seriously maybe you need your head examined anyways and I had these terrible headaches was diagnosed with having a anyway they had to take the top of my head off a couple of times see if I had a brain IR 2023-40 March 7 2023 Washington the internal revenue service today issued a renewed warning urging people to carefully review the employee retention credit the ERC guidelines before trying to claim the credit as promoters continue pushing ineligible people to file the IRS and tax professionals continues to see third parties aggressively promoting ERC schemes on radio and online so obviously we've had a lot of changes to the tax code way more than usual in the last few years a lot of it trying to kind of loosen the tax code to get money flowing in an attempt to help the economy during the pandemic the predictable kind of outcome of that kind of change is that there's going to be a lot of uncertainty in the environment they put out a lot of laws which are going to have problems with them in loopholes and whatnot because obviously usually laws are going to be changing slowly over time and as that happens all the all the kind of kinks and whatnot hopefully get worked out kind of like rolling out a software program or something like that that has bugs but just slowly roll it out and you kind of fix the process going forward so we're in an environment right now where we're trying to get back to some kind of normalcy after this kind of chaotic time in terms of the tax law so you've got to be quite careful in terms of people trying to promote this is an environment where we're schemers will thrive due to the environment right due to the changes in the code so we do have to be quite careful in that type of environment hopefully things will settle back down and we'll get some consistency and we can do some long term planning once again but we'll see so these promoters charge large upfront fees or a fee that is contingent on the amount of the refund anytime you're dealing with a tax professional where they want a fee based on a contingent of the refund or they seem to have some you know scheme some idea that they know about that no one else knows about or something like that and obviously that type of scheme I know about something no one else does that type of thing is a lot more easier for those kinds of you know it's a dishonest type of scheme usually but it's more prevalent it'll work more often in an environment where the tax code is changing because they're going to say well these people just don't know what the tax code changed we got to hit it now we got to do it at this point in time so you got to be careful whenever those two things happen or any one of those two things some person is saying I know I have a secret knowledge that no one else knows or someone is saying that they're going to charge you based on the refund that they get you those are not good science and the promoters may not inform taxpayers that the wage deductions claimed on the business federal income tax returns must be reduced by the amount of the credit quote while this is a legitimate credit that was provided on financial lifeline to millions of businesses they're continued to be promoters who aggressively mislead people in businesses into thinking they can claim these credits and quote said acting IRS commissioner Doug O'Donald quote anyone who is considering claiming this credit needs to carefully review the guidelines if the tax professional they're using raises questions about the accuracy of the employee retention credit claim people should listen to their advice the IRS is actively auditing and conducting criminal investigations related to these false claims people need to think twice before claiming these and quote so we're at a time right now where there was a lot of loose money on the tax code and they're probably tightening up at this point in time and that means they're probably looking to make some examples of people at this point in time that are that are going too far and exploiting like obviously was going to happen the loosening up of of the tax code so again you gotta be quite careful of that it looks like their language here sounding like they're getting more aggressive in this particular area so the IRS has been warning about the scheme since last fall there's links to that here but there continue to be attempts to claim the ERC during the 2023 filing season tax professionals note they continue to be pressured by people wanting to claim credits improperly the IRS office of professional responsibility is working on additional guidance for the tax professional community that will be available in the near future now again obviously a lot of these changes people are hearing a lot of things and they're saying hey all the people are getting this money from these changes in the tax code because of all the changes in the tax code that puts a lot of pressure on tax preparers who are trying to keep up with the tax law which is quite difficult because of the amount of tax law changes and the complexity with the laws and the fact that there's going to be bugs in them they haven't been worked out over a long period of time as tax law typically should be laid out over a longer period of time you would think so we got that issue so people and businesses can avoid the scheme and by not filing improper claims on the in the first place so if business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credits the business should file an amended income tax return to correct any overstated wage deductions okay so businesses should be cautious of advertising schemes and direct solicitations promoting tax savings that are that are too good to be true I think some of this also kind of comes from the idea that the IRS was going to have these types of policies meaning they're going to give money out first and then later on they're going to account for it on on the tax return so you've got these advanced credit payments that that this idea that they kind of expanded on a lot over the last few years you see it with the advanced child tax credit the stimulus payments were advanced payments they've got it with the insurance type of stuff and some of this taxes were similar kind of thing with the payroll taxes in some cases where you might be able to you know claim the credit before you file the return and what not that if there was going to be corrupt people that there's going to be corrupt people right if there are scammers out there then of course they can easily construct a scam you would think in those scenarios where they advertise that you're going to get this money and you do get the money because you got it in advance but you had a claim that was over extended and then when it when they when they have to actually file the return to claim the fact that they got an advanced payment that the scammers gone you know you would think that would be a typical kind of scam in a situation where you have this money flowing out in advance kind of payments so in any case some people might be kind of stuck in a situation at this point in time where they where they might have taken advanced money over what they should have been able to take because and now and now they've got to deal with that possibly by amending the prior returns because they've they overstated it or whatever is going to happen at that point anyways taxpayers are always responsible for the information reported on their tax returns improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest so that wouldn't be good what is the ERC the EREC is a refundable tax credit designed for businesses who continued paying employees while shut down to to the COVID-19 pandemic or who had significant declines in gross receipts from March 13, 2020 to December 31, 2021. So you'll recall they did the social distancing thing they shut down a bunch of businesses and then they tried to pay people to keep the employees on the payroll even though you don't need the employees if you shut down the business right so so you've got this weird kind of situation obviously that can get quite complex to have qualifications for you holding on to the employees in order to get the credit and so on and so forth. So eligible taxpayers can claim the ERC on and original or amended employment tax return for a period within those dates. So to be eligible for the ERC employers must have sustained a full or partial suspension of operations due to the orders from a appropriate governmental authority there's a link to that here. Limiting commerce travel or group meetings due to COVID-19 during 2020 or the first three quarters of 2021 experience a significant decline in gross receipts during 2020. There's a link to that here or decline in gross receipts during the first three quarters of 2021 or qualified as a recovery startup business for the third or fourth quarters or 2021. So completely clear as day these rules. I don't see how anyone could have could have gotten a misconception about about that kind of stuff that was ruled out like overnight and like a 24 hour period. How could you that's crystal clear. Any case as a reminder only recovery startup businesses are eligible for the ERC and the fourth quarter of 2021 additionally for any quarter eligible employers cannot claim the ERC on wages that were reported as payroll costs in obtaining PPP loan forgiveness or that were used to claim certain other tax credits. Now this is the other thing that got all messy because you've had these PPP loans which are called a loan. But if you were in compliance with the PPP loan then you might be able to forgive the loan. So then you've got these issues that do the PPP loan count as income if the loan was forgiven. And if you take the PPP loan which required you to hold on or pay some portion of payroll. Can you also double dip by getting some kind of advantage from the ERC even though you also got the PPP. So it's not but it's not confusing. If you messed it up. That's because you know you that's your fault. Anyways to report tax related illegal activities related to ERC claims submit by fax or mail a completed form one four two four two reports suspected abusive tax promotions or preparers there's a link to that here and any supporting materials to the IRS lead development center in the office of promoter investigations. So there's a mailing address here if you need that there'll be a link to this so you can check it out if you so choose the employers should also report instances of fraud and IRS related phishing attempts to the IRS at there's a phishing email phishing at irs.gov and Treasury Inspector General Tax Administration. There's a number here that you can call go to irs.gov to learn more about eligible requirements and how to claim the employee retention credit for qualified wages paid after March 12 2020 and before January 1st 2021 you've got notice 2021-20 2021-49 and revenue procedure 2021-33 for quarters wages paid after December 31st 2020 and before July 1st 2021 you've got other set of notices and revenue procedures for the quarter paid after June 30th 2021 and before October 1st 2021 you've got another set of notices and procedures and then for the quarter of wages after September 30th 2021 and before January 1st 2022 you've got another set of notices. So I mean all the material is here people all the material is here there's no excuse for for for messing this thing up so don't give me don't give me that look at all this stuff it's right there additional information if that wasn't enough we have more information there's the employee retention credit 2020 versus 2021 comparison chart. We've got the form 941-X instructions April 2022 revision for use in conjunction with form 941 instructions for relevant calendar quarter you got the form 941 instructions for December 2021 revision you got the form 941 instructions 2020 revision you got the form 943-943-X 944-944-X CT1 and CT1 X instructions all that stuff's here so just you know glance so you know to give it a read give the stuff a read for crying out loud and there'll be links to that here and there'll be a link to this in the description.