Small Business Owners:
Move This Task to the Front Burner
The importance of hiring a tax pro and exploring the IRS employee retention program.
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- If you don’t have a trusted tax professional or accountant, it’s time to get one.
- No business is too small to engage a quality tax pro.
- If eligible, small businesses and their accountants must consider leveraging the IRS Employee Retention Credit program now and when the moratorium is lifted.
- Working with a tax professional will increase the likelihood of receiving credit.
News from the IRS regarding the moratorium on new Employee Retention Credit (ERC) filings, got me thinking about the importance of having a trusted tax accountant in your corner. It may be something small business owners put on the back burner because they are so busy or wary of the cost. But once this role is filled you won’t know how you ran your business without one.
The Small Business Administration (SBA) moved quickly under challenging circumstances to launch small business pandemic relief programs. These included the Payroll Protection Program and the COVID-19 Economic Injury Disaster Loan Program. While the eligibility periods have ended, businesses have continued to apply for retention credit. This is available to eligible employers that paid wages to employees after March 12, 2020, and before Jan. 1, 2022.
Put this deadline on your calendar.
The IRS continues to issue guidelines and process applications as the statute of limitations to file amended payroll tax returns has not expired. Business owners have three years from the filing date to amend their returns. Unless changes are made, that means ERC filings are allowed until April 2025.
The IRS is making progress processing ERC claims, but warn consumers about aggressive marketing tactics by companies selling application filing services. Heightened scrutiny is one reason tax credit checks may be delayed, but errors in filing these complex returns is another. Legislative solutions are being explored to help address fraud and errors.
Apply with confidence following these steps.
Meanwhile, the IRS offers these simple steps for business owners to protect themselves from filing fraudulent or incorrect applications:
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- Work with a pro. Eligible employers who need help claiming credit should work with a trusted tax professional. Promoters aggressively marketing application services are out to make money. They are not looking out for you.
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- Get the details. Request a detailed worksheet explaining ERC eligibility and the computations used to determine the ERC amount.
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- Only apply if you believe you are qualified. Details about the credit are available on IRS.gov. Tax professionals can provide critical advice on the ERC.
Moratorium caused by questionable claims.
More recent news leaves business owners further in the dark regarding the ERC. On Sept. 14, the IRS ordered an immediate stop to new ERC processing due to a surge of questionable claims and concerns from tax professionals. The moratorium will run through at least Dec. 31, 2023. The IRS will continue to review previously filed claims and expects standard processing times to be 180 days. The processing time will be longer if filings need stricter review.
If your business has a pending application already filed with the IRS, the agency recommends the following:
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- Withdraw an existing claim that has not been processed if it was submitted improperly.
- If you received an ERC that you believe is in error, wait for details on the settlement program regarding how to repay the credit to avoid penalties.
- Use this moratorium period to review the guidelines and prepare to submit a correct filing.
Key takeaways.
As a lender to businesses and a business owner myself, I need to stay informed of any news that might affect the financial health of my business and my current and potential clients.
Even if your business is not affected by the ERC situation, here is what you can learn from this saga:
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- No business is too small to benefit from having a go-to tax professional.
- Do not wait until tax time to develop this critical relationship.
- Now is the time to evaluate your ERC eligibility or the accuracy of an existing filing.
- Avoid scammers. Getting information from trusted sources is critical.
Marissa Ignatowich is founder and president of Med Direct Capital, a direct lender (not a broker) of capital to small businesses. As an entrepreneur herself, Marissa is especially in tune to the challenges of small business owners. She has been providing capital and insights to small businesses across the U.S. for more than a decade. You can reach her at marissa@meddirectcap.com.