FORT LAUDERDALE, Florida., October 25, 2022 /PRNewswire/ — About October 19, 2022the Internal Revenue Service (IRS) has publicly warned employers “to beware of third parties advising them to claim the Employee Retention Credit (ERC) when they may not be eligible” (Link). This post is no doubt a response to the proliferation of what are now commonly referred to as “ERC factories” across the United States, which offer very aggressive eligibility positions and are largely staffed by non-professionals. tax or non-accounting. EZ-ERC CEO Kenneth Dettman second this warning…
CEO of EZ-ERC, Kenneth Dettmanechoes IRS warning about predatory ‘ERC factories’
“There is no doubt that nearly every business owner or operator with an email address has received several emails from ERC factories dangling the prospect of a ‘little-known’ payday loan that can cause a $26,000 cash credit per employee. With the scrutiny of the IRS and AICPA, it is especially important for employers to be on their toes and use common sense when deciding whether to pursue ERC through a third-party provider.”
What is an ERC crusher?
The term “ERC factory” is now commonly used to describe the countless ERC service providers alluded to by the IRS in its recent warning. The most common criticism of these “companies” is that they are largely made up of unaccredited sales and marketing professionals claiming to be “ERC experts” or “consultants” and offering tenure and eligibility positions. high-risk, often solely dependent on CDC/OSHA guidance and/or supply chain disruptions in an effort to universally qualify all businesses for ERC.
Here are some typical common traits of ERC grinders:
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No CPA ownership or accounting management. They are rarely founded, owned and/or managed by tax, accounting, payroll or legal professionals. Rather, most of them are owned and operated by “serial entrepreneurs” with little or no experience in the specialized tax or accounting services industry.
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Tax, accounting and legal functions outsourced. ERC factories often have the majority of their “workforce” (most of whom are independent contractors) focused on sales, marketing and business development efforts. While most major ERC factories have hired a token CPA or in-house counsel, most rely heavily on third-party accountants and attorneys to perform the tax, accounting, and/or legal work required as part of the ERC. Therefore, they effectively operate as a sales and marketing organization, with all the actual technical work outsourced to an unrelated and independently responsible party.
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Overtly aggressive marketing tactics on eligibility. ERC Mills often perpetuates aggressive marketing campaigns through various digital channels to lure well-meaning business owners into their grip. They hold out the prospect of a $26,000 credit to employees and ensure a high probability of eligibility for all businesses. Their eligibility positions are often based on obscure supply chain disruptions and/or rely on ineligible or outdated federal guidelines issued by the CDC and OSHA. These are considered weak positions in the industry and are less likely to withstand the scrutiny of the IRS.
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Important Contractual Disclaimers for Transferring Liability. Well aware that they lack sufficient qualifications and experience to provide good faith tax advice, most ERC factories include extensive disclaimers and disclaimers in their service agreements. These disclaimers often state that the “services provided” are not tax, accounting or legal advice.
The EZ-ERC point of view:
EZ-ERC’s management team is made up of several CPAs and/or lawyers with experience in large firms (Big Four, Big Law and Top 25 Global Consulting Firms), and maintains that ERC services must unquestionably be provided by a firm composed of experienced tax, accounting and legal professionals who are supported by sales and function marketing, not a firm of sales and marketing professionals who are supported (usually externally) by tax and accounting professionals.
“Tax” – The REB is a Federal payroll tax credit governed by Section 3134 of the Internal Revenue Code (IRC) and its regulations. It is further supplemented by IRS Notices 2021-20, 2021-23, and 2021-49. The more complex ERC fact patterns involving aggregation, number of full-time employees and related party issues are all governed by pre-existing IRC, tax regulations and case law (which are incorporated by reference into the aforementioned notices). Therefore, the starting point of the ERC should always be based on technical tax code and advice which is unequivocally the most apt to be analyzed by tax professionals.
“Right” – The notion of “total or partial suspension”, as defined in Notice 2021-20, is explicitly a test based on facts and circumstances. It is therefore essential that the test be evaluated by professionals experienced with other tests of SRI facts and circumstances and, in many cases, deserves a good faith legal analysis conducted by a licensed attorney.
“Accounting” – The calculation of credit, the analysis of the interaction between the ERC and the Paycheck Protection Program (PPP), and the interpretation of the rules relating to disqualified related parties are inherently accounting exercises.
“IRS Audits” – Finally, the possible “defense” of an ERC audit should generally be conducted by a CPA, Enrolled Agent (EA), or licensed attorney. It therefore goes without saying that experience defending a previous IRS audit is essential for a service provider who agrees to attend the defense of an ERC audit.
EZ-ERC encourages all business owners and operators to use common sense principles both in the selection of an ERC service provider and in the final decision to pursue ERC. If, during the sale and execution process, there is no interaction with a tax or legal professional, but a self-proclaimed “ERC expert” explains to you why you (and virtually all other companies) are undeniably eligible for credit, it is worth taking a step back and reassessing any potential quality or integrity issues with the company you are working with. This is especially true if you have agreed to pay an up-front or contingent fee pursuant to a contract stipulating that the services you receive are all but tax, accounting or legal services.
In the lyrics of Carl Sagan, “extraordinary claims require extraordinary evidence.” While there remain extraordinary ERC opportunities for many business owners, be sure to demand an extraordinary service team that delivers an exceptionally detailed and substantiated work product.
To learn more about the EZ-ERC management team, do not hesitate to consult their biography HERE:
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Kenneth Dettmangeneral manager (chief executive officer)
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Maxwell burns, Managing Director (responsible for tax and accounting services)
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Kyle MorabitoManaging Director (Legal Director)
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Jeffrey Budzikgeneral manager (head of technical services)
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Garner ReesbyFinancial director
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Adam FischerGeneral Counsel
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Victoria BeckCompliance Advisor
To learn more about the “benefits” of working with EZ-ERC over ERC factories and other ERC competitors, please visit our “Advantages EZ-ERC” page HERE.
For a summary of “Who and where are we?”, click on HERE.
EZ-ERC is not a law firm and does not provide legal advice. To the extent it is determined that a legal analysis is necessary, EZ-ERC will coordinate an external legal memorandum or opinion at no additional cost to our clients.
Find out how EZ-ERC can help you or someone you know www.EZ-ERC.com
Contact: Casey Finigan Dettman | [email protected]
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