IRS weighs guidance for small business tax credit. ‘People were duped,’ taxpayer advocate says

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Erin M. Collins, National Taxpayer Advocate.

Source: IRS

After a flood of business returns with a pandemic-era tax credit, the IRS is weighing guidance for those who wrongly claimed the tax break.

The employee retention credit was created to support small businesses during the Covid-19 pandemic. The IRS still has a large backlog of returns despite improvements. People claimed the credit and may have already received a refund, she added.

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Firms ‘bombarding’ small businesses with ads for Covid-era tax credits

IRS still has a sizable backlog of returns despite improvements
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The IRS warned business owners about “third parties” promoting the employee retention credit in October and recently renewed its warning by adding the issue to its annual list of Dirty Dozen tax scams for 2023.
As of March 3, just over 866,000 companies claimed and received employee retention credits totaling over $152.6 billion, according to the latest IRS Data Book.

IRS working on ERC credit guidance

Currently, there’s a backlog of Form 941-Xs, known as the adjusted employer’s quarterly federal tax return, which businesses must use to amend returns to claim the employee retention credit for 2020 or 2021. According to the IRS, there were approximately 537,000 Form 941-Xs that had not been processed as of June 14.

The biggest thing is to come forward first.

Rosemary Sereti

Managing director of Deloitte Tax

“The biggest thing is to come forward first,” said Rosemary Sereti, managing director of Deloitte Tax and a former IRS senior executive, when speaking to CNBC about employee retention credit mistakes. Once

reaches you, it is a bit too late. The IRS website says that the agency is working on the inventory at two sites with “trained staff” to review possible Covid-19 credits. The IRS website says the agency is working on the inventory at two sites with “trained staff” to review possible Covid-19 credits.

Possible IRS penalty wrongly claiming ERC

If you wrongly claimed the employee retention credit, you may be subject to an IRS penalty, according to Debra Estrem, managing director of private wealth controversy at Deloitte Tax, who also worked at the IRS Office of the Chief Counsel.

She said you may be subject to the “erroneous claim for refund or credit penalty,” which is typically 20% of the excess amount claimed. Debra Estrem, managing director of private wealth controversy at Deloitte Tax and former IRS Office of the Chief Counsel, said that you may be subject to the “erroneous claim for refund or credit penalty,” which is typically 20%. [the IRS]