ERC Director: Despite the Moratorium, Businesses should Continue to Submit Legitimate ERC Claims
By Chris Gitre Founder, CEO The Relief Consultants
Members of The Relief Consultants’ expert team joined numerous stakeholders in attending the informative IRS webinar focused on the ERC moratorium. During this session, the IRS ERC Program Director delivered a crucial message that promises to shape the strategies of many businesses moving forward.
Despite the moratorium on the ERC, the Program Director emphasized that companies with legitimate claims should continue to apply. This guidance comes as a beacon of assurance to businesses that have been grappling with uncertainty about the future of their ERC claims. It underscores the government’s recognition of the importance of supporting businesses that have sustained employment throughout the challenging economic times.
The Relief Consultants echoes the IRS’s sentiment and strongly encourages eligible businesses to take action. The moratorium, while signaling a temporary halt, does not close the door on valid claims. This is a vital distinction that can have a significant impact on a company’s financial health.
As a leader in financial consulting, The Relief Consultants specializes in aiding businesses to navigate the complexities of tax credits and incentives. With this latest information from the IRS, our team is poised to offer unparalleled guidance and support in the ERC claims process. We are committed to leveraging our expertise to ensure that our clients maximize their legitimate claims under the current regulatory framework.
Greetings, ladies and gentlemen. I am the CEO of The Relief Consultants, and today, I am pleased to share some exciting news with you. Before we dive into it, let’s delve into the IRS’ new tool to combat ERC fraud.
Opportunistic Actors and the Complex ERC Program
The IRS has recently introduced a new capability that allows businesses to withdraw their Employee Retention Credit (ERC) claims. Now, you might be wondering why such a provision exists. Well, it’s because of a group we’ll call ‘opportunistic actors’ — these are the folks who often inundate business owners with incessant direct mailers and bothersome phone calls. What’s noteworthy is that these ‘opportunistic actors’ occasionally went to great lengths, including a complete disregard for the program’s requirements, to intentionally over-qualify clients for the ERC. Crafty, isn’t it?
Now, here’s the deal: The ERC is one tricky program. It’s like trying to solve a puzzle made of tax codes and government rules. You really need to know your stuff to navigate it correctly.
Introducing The Relief Consultants’ Qualification Matrix
So, in light of the IRS’s announcement, we’ve got some exciting news of our own. At The Relief Consultants, we take the ERC seriously. We’ve been helping our clients with government grants and tax programs for the past three years, and in 2022, we added the ERC to our list of expertise.
To make sure everything’s crystal clear, we’ve launched a new feature in our client portal called the “Qualification Matrix.” Now, you might be thinking, “What’s that?” Well, it’s like a detailed map that shows you exactly why your company qualifies for the ERC.
What’s Inside the Qualification Matrix?
Quarterly Breakdown: The matrix tells you how many quarters your company qualifies for and which ones specifically.
The Why: It explains the exact reasons your company qualifies for each quarter.
Government Orders: For quarters where your eligibility hinges on a full or partial suspension of business operations, the matrix will even include the government order that caused it. You’ll know precisely what the order said.
Operational Impact: We’ll also spell out how the government order affected your business. How did your business specifically meet the eligibility for the ERC? You’ll know.
Qualification Matrix V1
We Play by the Rules
At The Relief Consultants, we don’t mess around. When we develop an eligibility opinion for your ERC claim, we use the same requirements the IRS would use in an audit. That means every document you need for an audit is right there, ready to go. No surprises!
And here’s the kicker: In the rare event that the IRS requests information about your company’s ERC, The Relief Consultants steps in to assume all ERC-related communications. We’ll point the IRS to how your company legitimately claimed the ERC, allowing you to focus on the tasks that matter most to your business — all with peace of mind.
Coming Soon: Your Access to the Qualification Matrix
Exciting news, folks! The Qualification Matrix is up and running, and in the next 10 days, every single one of our clients will have access to it. Yes, you heard that right — everyone!
Reach Out, We’re Here for You
We’ve also got something special for you. In the portal, you’ll find a direct line to your assigned consultant. If you ever want to chat about your Qualification Matrix or need more info for your peace of mind, they’re just a call or message away.
So, there you have it, our brand-new way to make sure your business is sailing smoothly through the ERC maze. We’ve got your back, and we’re ready to help you understand the ins and outs of the ERC. Stay tuned for more exciting updates from The Relief Consultants!
A Helping Hand, Even if You’re Not Our Client
At The Relief Consultants, we believe in doing what’s right, even if you’re not yet a part of our family. We understand that in the rush to navigate the complexities of the ERC, some businesses might have unknowingly contracted opportunistic “ERC Mill” actors to complete their claims.That’s why we want to extend a helping hand. If you find yourself in this situation, if you’re not a client of ours but have concerns about your ERC claim, we’re here for you. We’re happy to review your claim free of charge, potentially withdraw any inaccurate claims, and resubmit your credit within the eligibility guidelines. Your financial well-being matters to us, and we’re committed to ensuring that your ERC claim is accurate and in compliance with IRS regulations. Don’t hesitate to reach out, and let’s make sure you get the support you need, whether you’re a part of our client family or not.
By Chris Gitre Founder, CEO The Relief Consultants
Findings & Insights from The Relief Consultants’ Founder, Chris Gitre
On September 14th, the IRS announced a significant moratorium on the Employee Retention Credit (ERC), adding uncertainty to the timeline of many businesses’ ERC claims. The moratorium heralds two pivotal changes: an increased processing time for claims filed prior to September 14th and a complete halt on claims processing for submissions made on or after this date until January 1st, 2024.
Since the announcement, The Relief Consultants have engaged with numerous IRS agents and meticulously tracked all ERC-related communications from government channels. Our findings present the following:
The Current State of ERC Claims Processing
It’s clear that the IRS has temporarily ceased processing ERC claims. Not a single client has reported receiving their anticipated refund since the moratorium’s commencement. This halt is in contrast to the IRS’s initial intimation that only processing times would lengthen. The Relief Consultants perceive this as misleading, as the current situation is not a mere delay but a complete cessation of claim processing.
on X.com, user @danchodan leads the way about providing material updates to the ERC
Our analysis suggests that the IRS may be developing advanced fraud detection methods, possibly leveraging technology to automate the rejection of spurious claims. This endeavor could potentially streamline the process, swiftly filtering out illegitimate claims and advancing valid ones for further examination.
One method for detecting fraudulent activity could involve analyzing the ratio of ERC credit to wages reported on Employer Quarterly Tax Filings (Form 941s). IRS representatives have hinted at disqualifying claims that surpass an “expected credit,” based on a preset percentage of declared wages.
Additionally, we’ve learned that the IRS might scrutinize claims where the authorized signer on the 941x form lacks a prior association with the business tax account. While this could be an effective audit tool, it may inadvertently delay legitimate claims from businesses with new financial officers.
While the IRS’s complete plans to safeguard the integrity of taxpayer funds remain unclear, it is evident that they are fortifying their defenses against fraud. The full resumption of ERC claim processing is likely contingent on the successful implementation of these new measures.
The Wisdom of Submitting ERC Claims During the Moratorium
Despite the moratorium, The Relief Consultants stand by the wisdom of continuing to submit ERC claims, provided they are legitimate. Echoing sentiments from the IRS Tax Professional Webinar regarding the Moratorium, the Director of the ERC program ensured that submissions during this period will secure a place in the processing queue once the IRS resumes its operations.
Contrary to the shocking (and concerning) advice of some IRS phone agents and one representative of an uninterested PEO, suggesting that submitting before 2024 is useless, we believe in the simple logic of queuing: to receive something valuable, one must be in line for it.
The Future of the ERC Program
The ERC, being encoded in law, is not subject to arbitrary changes by the IRS; only an act of Congress could curtail the program prematurely. Recent inquiries from the House Ways and Means Committee to IRS Commissioner Werfel have begun the conversation of legislative action related to the ERC. However, it seems unlikely that Congress would risk public censure by ending a relief program that many American businesses could receive yet still have still not applied for.
It is more plausible to anticipate legislative changes surrounding the practices of tax preparers and promoters involved with ERC filings, potentially including fee limitations or required certifications.
Weeding out the Bad Apples
The repercussions of the ERC moratorium on some ERC firms are quite telling. As a major player in the ERC claims processing sector, Innovation Refunds (IR) was notably impacted almost immediately following the announcement of the moratorium. Within a mere 48 hours, IR laid off half of their workforce. This reduction was a direct response to the anticipated slowdown in the processing and approval of claims due to the IRS’s warning message.
IR CEO Howard Makler made substantial changes to his company mere hours after the “IRS Moratorium”
Prior to the moratorium, IR’s operations were expansive, with a significant advertising presence aimed at promoting their expertise in securing ERC funds for businesses. The moratorium, with its increased scrutiny and pause on claim processing, likely frightened IR leadership. The ripple effect on IR’s business was substantial, leading not only to staff reductions but also a complete halt to their advertising initiatives, effectively scaling down their public footprint.
Our internal interviews with former IR employees, and the subsequent onboarding of a skilled team member from their ranks, revealed that while IR’s calculation methods for filings appeared to be correct, their criteria for qualifying companies — particularly under the “Partial Shutdown due to Governmental Order Rule” — were overly generous. The moratorium has opened the door for scrutiny on substantiation, which Innovation Refunds, and firms alike, were failing to provide bona-fide eligibility verification for their clients. The end to various aspects of IR’s operations will occur in courtrooms.
One Reddit User opines that Innovation Refunds is in serious trouble
Impact on a Prominent ERC Promoter
Another significant effect of the moratorium was observed in the case of a prominent ERC promoter, who, in the face of the moratorium’s crackdown, ceased operations in the ERC space and pivoted to other government-related activities. This particular promoter was known for a successful referral partner program, which recruited individuals to act as a marketing funnel for potential claims. The moratorium effectively uprooted this business model by causing headaches for the promoter, ultimately persuading him to move on from the ERC.
The shutdown of this promoter’s ERC-related activities is indicative of a broader trend where the moratorium served as a filter, weeding out entities whose operations may not have been in full compliance with the many rules of the ERC.
In Conclusion
The moratorium’s inception has likely accomplished two things: it has provided the IRS with a period to refine procedures for better fraud detection and served as a cautionary signal to those engaged in substandard practices.
The complexities of the ERC are daunting, and more could be done by the IRS to elucidate the code for the public. Nevertheless, the moratorium marks a commendable stride towards eliminating unscrupulous entities from the ERC processing ecosystem.
In conclusion, while The Relief Consultants eagerly anticipate the return of normal processing operations, we view the moratorium as a critical juncture. It represents an opportunity for the IRS to enhance the integrity and efficacy of the ERC claim process. As the landscape evolves, we remain committed to guiding businesses through legitimately filing their claims with the expertise and insight that has become our hallmark.
The initial confusion surrounding eligibility for the Employee Retention Credit (ERC) was compounded by subsequent legislative changes, resulting in a complex eligibility matrix for employers to navigate without clear guidance. Despite the lack of formal regulatory guidance from the IRS, taxpayers must understand the legislation’s details to determine eligibility and calculate the ERC accurately. As legislative updates continue to roll out, it is crucial to address the misconceptions that have arisen due to the complexities and ambiguities of the ERC.
Below are five common misconceptions about the Employee Retention Credit:
It is required to have experienced a decline in revenue to qualify for the ERC. Employers may be eligible for the credit even if they have not satisfied the gross receipts test.
It is necessary for an employer’s operations to have been completely shut down to qualify for the ERC. Employers who experience a partial suspension of operations due to a government order may still be eligible for the credit.
Employers who have received a Paycheck Protection Program (PPP) loan cannot take advantage of the ERC. The CARES Act initially prohibited PPP loan recipients from taking the ERC, but legislation retroactively allowed employees to claim both if eligible.
Tax-exempt organizations are considered ineligible employers for the ERC. Unlike most federal tax credits that are taken against income tax liability, tax-exempt organizations are explicitly acknowledged as eligible employers under the CARES Act.
The size of an employer’s business affects only the types of wages included in the ERC calculation as well as eligibility. Whether an employer is classified as small or large based on their average full-time headcount in 2019 only affects the type of wages that can be included in the ERC calculation, and not eligibility. While qualified wages for the ERC vary, certain types of wages cannot be included for any employer, such as those falling under the double dipping prohibition, wages paid to ineligible individuals, or wages not subject to FICA.
Given the complexity of the ERC, it is recommended to consult with professionals who have experience in this area to determine whether your business is eligible. Although the original provisions of the CARES Act ERC have changed, its intent has remained the same.
The California Employment Development Department (EDD) has faced significant challenges in processing pandemic-related claims, including unemployment insurance and the Pandemic Unemployment Assistance (PUA) program. There are several reasons why the EDD has had so many issues with these claims.
One reason is the sudden hiring of representatives. The EDD was overwhelmed by the sudden influx of claims related to the COVID-19 pandemic, which required the agency to rapidly hire additional staff to help process these claims. This sudden hiring led to a lack of training and experience among many of the new staff, which contributed to the processing issues.
In many instances, The Relief Consultants noticed, that government representatives would give wrong or detrimental advice to claimants. Upon following such advice, claimants faced a slew of issues which further exacerbated the deficiency.
Another reason is the sheer influx of claims. The COVID-19 pandemic had such a devastating impact on the economy, especially those in need. This lead to massive troves of unemployment claims being filed. The EDD was simply not prepared for the volume of claims it received, which led to delays and backlogs in processing.
A government Task Force was formed to investigate the EDD’s handling of pandemic-related claims and to identify the root causes of the problems. The Task Force found that the EDD was understaffed, had outdated technology, and was not prepared to handle the volume of claims it received.
Finally, the complexity of the programs also contributed to the processing issues. The PUA program, in particular, was designed to provide assistance to self-employed individuals and gig workers who are not normally eligible for unemployment insurance. This required the EDD to set up a completely separate system for processing these claims, which added to the complexity and contributed to the delays. Some government representatives called the unemployment systems “the most complex government programs there is”.
In conclusion, the California Employment Development Department (EDD) has had significant issues processing pandemic-related claims due to the sudden hiring of representatives, the sheer influx of claims, the problems identified by the government Task Force, and the complexity of the programs. These issues have resulted in delays and frustration for many individuals and businesses seeking assistance during the COVID-19 pandemic.
Not to worry, since April of 2020, The Relief Consultants have been working with eligible claimants and spoke to the Department on a routine basis. Because of our volume and efficiency, The Relief Consultants have been able to cut through dysfunction at EDD by speaking to representatives in their language and kindly problem solving with staff when they present incorrect information to claimants.
If you are an eligible claimant who was wrongly denied benefits, The Relief Consultants is here to help you.
The Employee Retention Credit (ERC) was introduced as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 in response to the COVID-19 pandemic. The credit was designed to help businesses keep their employees on payroll and maintain their operations during this challenging time.
Since its inception, the ERC has undergone several changes through subsequent stimulus bills. These include the Consolidated Appropriations Act (CAA) of 2021 and the American Rescue Plan Act of 2021 (ARP).
The CARES Act established the ERC as a refundable credit for eligible employers equal to 50% of qualified wages (up to $10,000 per employee) paid during the COVID-19 crisis. To be eligible, a business had to have experienced a full or partial suspension of operations due to a government order related to COVID-19, or a significant decline in gross receipts.
The CAA, which was signed into law in December 2020, made several changes to the ERC. It extended the credit through June 2021 and increased the credit rate to 70% of qualified wages. It also expanded the definition of qualified wages to include health plan expenses, and increased the maximum credit per employee to $7,000 per quarter.
The ARP, which was signed into law in March 2021, further extended the ERC through the end of 2021 and increased the credit rate to 80% of qualified wages. It also expanded the definition of qualified wages to include amounts paid or incurred to provide emergency family and medical leave and emergency paid sick leave to employees, and eliminated the requirement that businesses must have experienced a significant decline in gross receipts to be eligible for the credit.
In summary, the ERC has undergone several changes since its inception in the CARES Act of 2020, with subsequent stimulus bills extending the credit, increasing the credit rate, and expanding the definition of qualified wages. It’s a lot to digest when it comes to the changes. However, The Relief Consultants carefully stay on top of each requirement in order to maximize the refund you’re eligible for.
The Employee Retention Credit (ERC) is a valuable tax credit that rewards businesses who adjusted and kept employees on during COVID-19 pandemic. It was initially designed to help businesses keep their employees on payroll and maintain their operations during a challenging time.
Now that shutdowns are over, businesses can retroactively claim this credit — which is rightfully due to them if they meet the eligibility criteria.However, some individuals and organizations, known as ERC Mills, have been taking advantage of this credit by over-qualifying businesses for the ERC. This is done through a variety of methods, including providing false or misleading information about a business’s eligibility for the credit, or by providing inadequate documentation to support the claim. There are several reasons why business owners should avoid ERC Mills and be cautious when seeking assistance with the ERC.
First and foremost, using an ERC Mill to over-qualify for the credit is fraudulent and can result in serious legal consequences for the business owner. The IRS has made it clear that it will pursue criminal charges against individuals and organizations that engage in fraudulent activities related to the ERC.
In addition to the legal risks, using an ERC Mill can also be financially detrimental to a business. If a business is found to have received the ERC improperly, it may be required to pay back the credit, plus interest and penalties. This can result in significant financial hardship for the business, particularly if it is already struggling due to the impact of the pandemic. Furthermore, using an ERC Mill may also damage a business’s reputation, as it can be perceived as engaging in unethical or fraudulent behavior. This can lead to lost customers and damage to the business’s reputation, which can be difficult to recover from.
Therefore, it is important for business owners to carefully research any organization or individual offering assistance with the ERC and to ensure that they are qualified and legitimate. It is also important to accurately and honestly report all information related to the ERC, as doing so can help to protect the business and its reputation. The Relief Consultants is up front with its clients so they can have clarity on if they qualify.
If a business does not qualify for the ERC, The Relief Consultants will provide clear reasoning as to why not.But if a business does qualify, The Relief Consultants provides each client with a comprehensive Audit Defense Document that points to the exact IRS code that qualifies that business for the Employee Retention Credit.The Relief Consultants care about integrity, which is why it is the trusted and reliable resource for the ERC.
