Employee Retention Credit (ERC) solutions
Employee Retention Credit (ERC) solutions
Responding to ERC controversy
With frequent changes to the ERC program and an increasing number of ineligible claims, the IRS halted processing new ERC claims and significantly increased scrutiny of existing claims. Businesses have fallen victim to widespread fraud due to aggressive marketing promoters, misinterpretation of guidelines and outright fabrication of facts. However, the Voluntary Disclosure Program (VDP) was implemented as an amnesty program to allow certain parties to withdraw potentially incorrect claims without penalty. Eligible taxpayers had until March 22, 2024, to apply to the VDP.
If you have questions about a claim you filed, contact our ERC specialists to help you navigate the process.
Second ERC VDP now open
The IRS has recently reopened their second iteration of an ERC voluntary disclosure program. Under the terms of this program taxpayers who agree to return 85% of ERC claims paid, on a quarter-by-quarter basis, may keep the remaining 15% and avoid having to file amended income tax returns. This program is only available until Nov. 22, 2024. Voluntary disclosure could potentially be a welcome option for companies that are worried about the recently announced IRS
enforcement, are revisiting eligibility as part of a due diligence process or a change in management or are concerned about the consequences of filing amended income tax returns reducing the wage expenses by the amount of ERC they received. Baker Tilly has significant experience assisting clients with ERC and other voluntary disclosures. For more information, please contact our team.
ERC services
See how our team can help you
VDP
The IRS offers a voluntary disclosure program for ERC claims, allowing taxpayers to retain 20% of the ERC received. By returning the remaining 80%, taxpayers can avoid future audits, retain accrued interest and avoid amending income tax returns. The program deadline is March 22, 2024. Baker Tilly specialists can help in evaluating ERC claim risks and assist with program submissions if deemed beneficial.
IRS audit assistance
ERC audits are complex, requiring taxpayers to substantiate eligibility and accurate credit calculations to the IRS. Those relying on the suspension test must demonstrate the impact of state and local orders on their operations. Baker Tilly has extensive experience representing taxpayers in ERC audits, advocating for eligibility under both gross receipts and suspension tests.
Tax due diligence assistance
ERC presents a challenge for M&A deals due to its size and statute of limitations. Acquirers often seek assurance from qualified firms regarding the credit’s legitimacy to mitigate long-term risks. Baker Tilly offers specialization in ERC regulations and can conduct independent reviews for M&A firms seeking a second opinion or businesses preparing for sale, aiming to address ERC concerns preemptively before formal due diligence.
ERC repealed early by bipartisan infrastructure act
The employee retention credit provided temporary relief for employers who continued to pay their workers despite COVID-19-related disruptions, but with most restrictions for businesses easing, the ERC no longer seemed necessary and its termination was included in the recently passed $1.2 trillion bipartisan infrastructure act.
Baker Tilly can help you navigate the extended ERC
The extended and expanded employee retention credit (ERC) from the Consolidated Appropriations Act (CAA) could have significant benefits for you and your business. However, the regulations surrounding the ERC tend to be fact specific and tedious. Baker Tilly has put together a set of comprehensive resources available to assist businesses that are considering taking advantage of the ERC.
New guidance is being released regularly. Contact our ERC specialists to learn if you qualify for the ERC.
Additional ERC resources
IRS guidance on early ERC repeal and penalty relief
The IRS published guidance concerning the recently announced early – and retroactive – repeal of the employee retention credit (ERC).
IRS issues additional ERC guidance
IRS Notice 2021-49 addresses changes made to the employee retention credit (ERC) by the American Rescue Plan Act of 2021 (ARPA) applicable to 2020 and 2021.
Coronavirus benefit coordination matrix
Understand Coronavirus benefit and relief programs, who is eligible and how the benefits coordinate with other programs.
Updates to employee retention credit present significant opportunities for employers
The latest round of COVID-19 relief extends and expands the employee retention credit, creating retroactive and prospective changes for employers.
ERC flowchart
Employee retention credits as updated by the Consolidated Appropriations Act, 2021 (CAA)
The CAA made several significant employer-friendly changes to the ERC and have effectively created two separate versions of the credit, one for 2020 and another for 2021. We have developed a flowchart that outlines the differences between the two and guidance on how to determine eligibility.
Related support
Colin Walsh
Colin Walsh is a tax principal and the practice leader of our tax advocacy and controversy services (TACS) group, a practice within Baker Tilly’s specialty tax team. An accomplished professional, Colin has served the firm since 2009 and has extensive experience in tax practices and procedures, tax controversy and dispute resolution. In addition to leading the TACS group, Colin also serves as a subject-matter authority in opportunity zones and various federal excise taxes.
Tax Advocacy & Controversy Services
Baker Tilly provides IRS audit and appeals representation and supports IRS installment agreements and offers in compromise, requests for penalty relief, private letter ruling requests and IRS voluntary disclosures – offshore and domestic.
For more information or to learn how Baker Tilly specialists can help, reach out to your Baker Tilly advisor or contact our team.