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The Consolidated Appropriations Act 2021 permitted taxpayers to take advantage of both the ERC and the PPP, provided that the same wages were not used simultaneously to qualify for both the ERC and the debt forgiveness element of the PPP. This opened the door for taxpayers who previously could not take advantage of the ERC due to their participation in the PPP.
The IRS provided clearer guidance with the issuance of IRS Notice 2021-20 (addressing the ERC for 2020), IRS Notice 2021-23 (addressing the quarters ended March 31 and June 30, 2021), and IRS Notice 2021-49 (addressing the quarters ended September 30 and December 31, 2021, with the Infrastructure Investment and Jobs Act later eliminating the quarter ended December 31, 2021, except for Recovery Start-up Businesses).
Taxpayers and service providers were now able to better determine employer eligibility, yet as written, this guidance still left room for interpretation. It also opened the door for promoters to come in and capitalize on this little-known and misunderstood tax credit.
"Business owners, act now to take advantage of this little-known federal program that will pay you $26,000 per employee during the pandemic."
Sound familiar? You may not be too far off if you hear vague echoes of “mesothelioma hotline” and “…were you injured on the job? ....”.
Unfortunately, these “too good to be true” advertisements by promoters are often, well… too good to be true. These “businesses” consistently fail to adhere to the guidance issued by the IRS and will “qualify” companies for credits under the ERC for periods in which the employer does not qualify, utilizing wages that are clearly ineligible for purposes of the credit.
At best, these fly-by-night companies are negligent in the provision of their services, and, at worst, they are likely conspiring to commit fraud.
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