The IRS recently issued a warning bringing attention to third parties who are seemingly targeting employers who may be eligible to claim the Covid-era Employee Retention Credits.
In short, one might construe that the warning implied that there are third parties who may be encouraging employers to take “improper positions” related to eligibility and computation of the ERC.
The IRS warning goes on to state that employers should be cautious of “advertised schemes and direct solicitations” that sound too good to be true.
The ERC is a refundable tax credit made possible by the CARES Act, and the intent was to encourage businesses to keep employees on their payroll during a shutdown or when a business had a significant decline in gross receipts.
The ERC is available for periods from March 13, 2020 to September 30, 2021 for most employers, and through 12/31/21 for recovery startup businesses. However, businesses must meet certain criteria to be eligible for the ERC. In its news release warning of these “schemes”, the IRS made it clear that eligible employers must have:
- sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during 2020 or the first three quarters of 2021,
- experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021, or
- qualified as a recovery startup business for the third or fourth quarters of 2021.
As a reminder, employers are not eligible to claim the ERC on wages that it reported as payroll costs in obtaining PPP loan forgiveness.
For more details regarding the ERC, click here.
Let your IMA Benefits team know if you have any questions. We review affordability every year with our applicable large employer (ALE) clients and are happy to assist as you strategize for your plan year beginning in 2022.
IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.
This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.