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The Dangers of Using an ERTC Mill

Photo by Scott Graham on Unsplash

The IRS has recently warned employers to be on the lookout for third-party companies promising significant tax breaks in exchange for utilizing their services. 

These so-called “ERTC Mills” are taking advantage of the newly expanded Employee Retention Tax Credit (ERTC) by luring employers with the promise of significant savings. However, the IRS has stated that these offers are often too good to be accurate and that employers should be cautious of any company guaranteeing a specific amount of money back.

What You Need to Know

According to the IRS, “Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit. These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund and may not inform taxpayers that wage deductions claimed on the business’s Federal income tax return must be reduced by the amount of the credit.”

The ERTC is a refundable tax credit available to eligible employers who have been financially impacted by COVID-19. To claim the credit, employers must retain their employees and pay them qualifying wages. The credit is worth up to 50% of qualifying wages, up to $10,000 per employee.

While the ERTC can be an excellent way for businesses to save money, it’s important to remember that some rules and regulations must be followed for the credit to be claimed. That’s where ERTC Mills comes in.

These companies often guarantee a certain amount of money back to employers without first doing due diligence to see if the employer qualifies for the credit. In some cases, these mills will even file false paperwork on behalf of the employer to get the credit approved.

Not only is this type of behavior illegal, but it can also result in significant penalties for both the employer and the mill. Therefore, if you suspect an ERTC Mill is trying to take advantage of you or your business, it’s important to report them to the IRS immediately.

Bottom Line

The Employee Retention Tax Credit can be a great way for businesses to save money. Still, you need to be careful of anyone who promises guaranteed savings without doing any due diligence first.

These so-called “ERTC Mills” will often file false paperwork on your behalf to get the credit approved, which can result in significant penalties for you and the company. If you suspect that an ERTC Mill is trying to take advantage of you or your business, report them to the IRS immediately.

Taxpayers can report illegal activities related to the ERTC on Form 3949-A or can report instances of fraud to the Treasury Inspector General at 1-800-366-4484. While the PEO industry has dealt with this issue for over a year, it is gaining broader recognition now, with agencies such as trade associations like the AICPA publicly decrying so-called ERTC mills.