The IRS is offering a voluntary program that allows you to withdraw your Employee Retention Credit (ERC) if you have already received it, and “only” pay back 80% of what you received.
Is this a smart move? Should you withdraw your ERC? Before you withdraw your ERC, or not, you should carefully review the impact of Covid-19 on your business in 2020-2021.
If you had W-2 employees in the applicable quarters, and Covid-19 Governmental Orders resulted in a greater than 10% decline in your ability to deliver goods and services, you qualified as a Partial Shutdown. That is a partial shutdown as defined in IRS Guidance.
Moreover, the IRS Guidance is an interpretation of the written law. It was, in my opinion, a sincere attempt to interpret the intention of Congress and put some guidelines on a hastily written and somewhat nebulous law. That does not mean it is correct and above challenge.
Now it seems the IRS is trying to get as many people as possible to withdraw their claims.
- I am a legitimate tax professional with a legitimate tax firm and lots of blogs and videos on tax topics.
- That I warned of improper ERC claims.
- That my ERC videos are balanced and based on a thoughtful interpretation of the law and IRS Guidance.
Now, the IRS Guidance is WAY junior to the law and has not been challenged in court. I am sure it will be.
Moreover, the recent pronouncements from the IRS seem harsher in their interpretation than their original guidance.
They even have a test to see if you qualify that does not even define what constitutes a partial shutdown.
Now, if you had no adverse consequences from Covid-19 governmental orders and did not meet the gross receipts or Recovery Start-up Business Tests, then taking the IRS Voluntary Program looks like a good option.
My recommendation would be to review your actual situation calmly and carefully. Do not be rushed or frightened into a hasty decision.
I suggest you review my ERC videos and blogs. Contact Torchlight Tax at 1-877-758-7797 or email us at email@example.com for a free consultation.
The IRS is giving you an “out” here on your ERC claim. If you knowingly and falsely claimed the ERC, you should take their offer.
Now, I am going to give you an analogy. Suppose you got a letter from your local District Attorney offering you the opportunity to admit to a crime and you will get no jail time and your financial penalty will be reduced by more than 20%. You can just come in and admit you did it. No handcuffs. It’s only money.
Hmmh…. The DA is just giving you an easy out, out of the goodness of his heart???
Well, maybe. But then again, maybe his case is weak. Maybe this has something to do with his generous offer. Maybe he does not have the resources to prosecute all the guilty parties.
A lot of people turning themselves in would perhaps make his job easier!
I sincerely think a lot of businesses were hurt by Covid-19 Governmental Orders even though their Gross Receipts did not crash. Some, by great effort, kept their Gross Receipts from crashing, but did suffer from a greater than 10% decline in their ability to deliver goods and services. Moreover, the 10% decline was not in the law itself.
The withdrawal option is a serious decision. Review the IRS communications. Talk to a trusted EA, CPA, or Tax Attorney. Review your records and your conscience. Look at my blogs and videos. Have someone explain why IRS Guidance is not law and is way junior to it.
Look. It is up to you. You are welcome to contact us for a free consultation.
We offer the services of ERC Review and if needed ERC Audit Defense.
Withdrawing your ERC may be your best option. We can discuss and recommend. You will be the one to decide. We will be glad to give you a free consultation and help in any way we can.
You can read the full IRS article here.