IRS weighing guidance for small business tax credit, taxpayer advocate says
After a flood of business returns with a pandemic-era tax credit, the IRS is weighing guidance for those who wrongly claimed the tax break.
The employee retention credit was created to support small businesses during the Covid-19 pandemic. There’s still time to amend returns and claim the credit, which is worth up to $5,000 per employee for 2020 or $28,000 per employee in 2021.
Experts say the opportunity has sparked a wave of specialist firms falsely promising business owners they qualify for the complicated tax break.
“I do think people were duped,” said National Taxpayer Advocate Erin Collins, speaking at the American Institute of Certified Public Accountants’ annual conference this month. People claimed the credit and may have already received a refund, she added.
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The IRS warned business owners about “third parties” promoting the employee retention credit in October and recently renewed its warning by adding the issue to its annual list of Dirty Dozen tax scams for 2023.
As of March 3, just over 866,000 companies claimed and received employee retention credits totaling over $152.6 billion, according to the latest IRS Data Book.
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