AICPA lauds IRS warning of ERC Mills, anonymous reporting process

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The American Institute of CPAs (AICPA) lauded the Internal Revenue Service (IRS) warning over third-party vendors promoting improper Employee Retention Credit (ERC) claims.

Form 3949-A, Information Referral, will provide a vehicle for individuals, firms and CPAs to anonymously report questionable ERC mills. The form previously had been available for use to anonymously report fraud. Now it is earmarked to report ERC fraud as well.

Established nearly three years ago, ERC was as part of a larger relief package to help businesses pull through the pandemic. More recently, AICPA has reported that members have expressed concern with the rise of non-CPA ERC vendors taking inappropriately aggressive positions.

Established nearly three years ago, ERC was as part of a larger relief package to help businesses pull through the pandemic.

The vendors submit claims on behalf of businesses that are either unknowingly unqualified or qualified for a much smaller credit, charging upfront contingency fees of up to 25 percent of the claimed credit. If audited by the IRS, the claims could result in drastic reductions to the improperly obtained credits, costing the business significantly.

AICPA President and CEO, Barry Melancon, CPA, CGMA, says that for more than a year, AICPA has communicated its concerns to the IRS and the Department of the Treasury regarding the unscrupulous business practices of ERC mills.

“We are encouraged by this acknowledgement by the IRS of these questionable business practices around the ERC. This credit has been hugely beneficial to countless businesses that struggled to navigate the challenges brought on by the pandemic, and CPAs have often advised clients and business owners against taking the improper recommendations of these third-party vendors. We are pleased that employers and others now have a mechanism to anonymously report bad actors and help to protect the public against them.”

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