New process provided for anonymous reporting of ERC mills

By Martha Waggoner

The IRS is providing a new way for CPAs and others to make anonymous reports about third-party vendors who promote improper claims for the employee retention credit (ERC), which was created as part of a larger COVID-19 relief package intended to help employers pull through the pandemic.

It is a move that the AICPA supports, as it has expressed its concerns about "the unscrupulous business practices of ERC mills" for over a year, said AICPA President and CEO Barry Melancon, CPA, CGMA.

"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," Melancon said. "We are pleased that employers and others now have a mechanism to anonymously report bad actors and help to protect the public against them."

Form 3949-A, Information Referral, previously was used to report fraud anonymously and now allows CPAs, firms, and individuals to do the same with questionable ERC mills.

The ERC, which was established nearly three years ago by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, is a refundable tax credit for businesses that paid employees while they were shut down due to the COVID-19 pandemic or had significant declines in gross receipts. For most employers, the credit ended on Sept. 30, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period between March 13, 2020, and Sept. 30, 2021.

However, the AICPA has heard from members concerned about an increase in the number of ERC vendors — who are not CPAs — promising tax savings that go beyond what the business can claim or even on behalf of businesses that do not qualify for the credit. If the IRS audits a business that makes an improper ERC claim, that business could have to repay the credit and also pay penalties and interest.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.

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