ERC Claim Correction Deadline Looming

7 Warning Signs of an Incorrect ERC Claim

1. Claiming for Too Many Quarters: While some businesses may be eligible for multiple quarters, claiming for all available periods is uncommon. Carefully review each quarter’s eligibility requirements.
2. Misinterpreting Government Orders: Not all government orders qualify. The order must have fully or partially suspended your operations due to the pandemic, not merely been in place.
3. Incorrect Employee and Wage Calculations: ERC calculations are complex and vary by time period. It’s crucial to accurately calculate qualified wages and avoid claiming for ineligible employees.
4. Citing Supply Chain Issues: Supply chain disruptions alone don’t qualify. Only in specific situations, involving your supplier’s qualifying government order, may you be eligible.
5. Overstated Claims Within a Quarter: ERC is typically claimed for the specific period of suspension, not the entire quarter. Ensure your claim reflects only qualifying wages during the suspension period.
6. Non-Existent Business or Unpaid Wages: Businesses cannot claim ERC for periods without employees or before obtaining an employer ID number.
7. Promoters Encouraging Risky Claims: Beware of promoters who downplay the potential consequences (penalties, interest, audits) of incorrect claims.

Resolving Incorrect ERC Claims

The IRS offers two options for resolving incorrect claims:

• Voluntary Disclosure Program (VDP): This program, ending March 22nd, 2024, allows eligible participants to repay the ERC minus 20%.
• Claim Withdrawal: If the ERC is received after December 21st, 2023, and is incorrect, do not cash the check. Withdraw the claim to avoid penalties and interest.

Resources for ERC Eligibility and Information

• IRS ERC FAQs
• Interactive ERC Eligibility Checklist

Remember: The IRS encourages businesses to seek professional help for complex ERC claims.

By reviewing eligibility, addressing any discrepancies, and utilizing the available programs before the deadline, businesses can avoid future issues and ensure they receive only the ERC they are rightfully entitled to.

There’s an application form that employers must file to participate in the program and other rules apply. Contact your Brady Ware tax advisor for more information.