Recession or not, we have resources to help your business master this moment of high interest rates, labor shortages, sticky inflation, and slower growth. We've put together our Agility & Excellence Resource Center to bring you strategies and solutions with a finger on the pulse of what's ahead.

While the employee retention tax credits (ERTC) had a bumpy road in 2023, business owners should not lose sight of the value this popular tax credit offers and be sure to watch for upcoming deadlines to file.

The ERTC was intended to encourage employers to keep their employees on their payroll during the COVID-19 pandemic in 2020 and 2021. For most eligible employers, the ERTC applies to wages paid through Sept. 30, 2021. The fully refundable tax credit is up to 50% of up to $10,000 in wages paid by an employer that had their business either partially or fully suspended during the pandemic or had gross receipts dip by more than 50%. The benefits for 2021 increased from 2020.

However, the ERTC made news in 2023 due to the ongoing prevalence of what the IRS calls ERTC mills, which it describes as illegitimate, third-party ERTC promoters who aggressively encourage businesses to file fraudulent and excessive claims. The IRS has classified ERTC mills as a tax scam.  

After issuing warnings about unscrupulous practices, the IRS in September placed a moratorium on processing new ERTC claims for the balance of 2023, although claims already submitted will continue to be processed. The agency also announced a withdrawal process for employers who may have fallen prey to scams and believe their claim is not valid — as long as payment has not been issued. The IRS launched a Voluntary Disclosure Program to allow certain employers to repay questionable ERTCs at a discounted rate.

This has led some employers to question their ability to retroactively claim the credit.

Can My Business Still Claim the ERTC?

Business owners can still claim the ERTC in 2024 and benefit from increased cash flow as a result, but the time to act is now. The deadline for filing claims for 2020 is April 15, 2024, and the deadline for 2021 claims is April 15, 2025. Employers eligible for filing claims must meet comprehensive and time-intensive substantiation requirements, which are complex and differ by year.

How Can I Avoid Tax Credit Mills?

The IRS is on high alert for suspicious and fraudulent claims, which can result in substantial penalties and interest payments — and even expose the business to potential criminal liability. The IRS recommends that employers work with trusted tax professionals who thoroughly understand ERTC eligibility rules and learn the warning signs of ERTC scams. Employers must carefully conduct due diligence to test ERTC advisors by examining their qualifications, ERTC claim experience, references, fee arrangements and other documentation.

What Else Should I Know?

Income tax deductions for salaries used to claim the credit must be reduced by the credit amount. The IRS does not allow the deduction adjustment to be made on the return for the year ERTC payments are granted.

Be sure to partner with tax and financial professionals who are highly experienced in ERTC eligibility and claims process. Ask if they have experience in:

• Assessing their ERTC claim qualifications and risk
• Calculating estimated credits
• Providing education and guidance on the ERTC claims process, timing and expectations

If they answer “no,” move on until you find a professional who confidently says “yes.”

Connect with one of our tax professionals to determine your company's ERTC eligibility. 

Copyright © 2024, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly traded and privately held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).