IRS tells small businesses to withdraw ineligible claims for lucrative tax credit

Source: Yahoo Finance

The Internal Revenue Service (IRS) is urging small business owners who have claimed the employee retention credit (ERC), a lucrative tax credit worth tens of thousands of dollars, to reevaluate their eligibility and withdraw any unqualified applications. This warning follows concerns about aggressive promoters who over-qualified business owners for the credit, leading to the IRS halting the processing of ERC claims and putting taxpayers at risk of having to return the credit with penalties and interest charges.

The ERC is a refundable tax credit designed to incentivize employee retention for businesses affected by the COVID-19 pandemic. Qualified employers can claim up to $26,000 per worker on their payroll between March 12, 2020, and Dec. 31, 2021. However, the prevalence of scams by "ERC mills," often pop-up online companies, led to the IRS temporarily suspending the processing of ERC claims. These fraudulent firms filed claims for business owners who didn't qualify and received a portion of the refund as their fee. Many business owners unknowingly received money they shouldn't have and now face repayment.

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