Employee Retention Credit Refund

If you think that you have worked with an ERC mill or an inexperienced advisor, you should consider having an ERC expert take a second look at your claim.

The ERC legislation encompasses intricate regulations regarding entity aggregation, PPP/ERC interaction, employee count, gross receipts declines, and the impact of governmental orders on your business – all necessitating the review of an experienced professional. Due to the intricate nature of the eligibility tests and exercises, numerous businesses might have inadvertently submitted inaccurate claims.

The repercussions of filing an erroneous ERC claim, whether intentional or not, can be severe and formidable. Consequences may involve the obligation to repay the credit, potentially with additional interest charges and penalties. In some instances, businesses may face criminal liability for adopting fraudulent tax positions.

Drawing from the insights of our professionals at Sagemont Advisors, there are key areas where unknowing taxpayers can be subject to the pitfalls of misguided advice or inadvertently file improper claims.

Improper reliance or overapplication of the partial suspension of operations eligibility test, such as relying on any of the following arguments to support a partial suspension of operations may put your eligibility position at risk:

Restrictions or modifications solely under OSHA and CDC (more on the OSHA position here); Customer shutdowns or reduced customer demand; Inability to hold sales meetings in person; Inventory costs increased; Shift to virtual workforce with comparable operations; Trade shows were canceled; or Mask or vaccine...

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Improper reliance or overapplication of the partial suspension of operations eligibility test, such as relying on any of the following arguments to support a partial suspension of operations may put your eligibility position at risk:

Restrictions or modifications solely under OSHA and CDC (more on the OSHA position here);
Customer shutdowns or reduced customer demand;
Inability to hold sales meetings in person;
Inventory costs increased;
Shift to virtual workforce with comparable operations;
Trade shows were canceled; or
Mask or vaccine mandates.

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Faulty or weak supply chain arguments without a supporting governmental order are a red flag.

Note, for a business to claim a partial suspension due to a government order impacting their supplier, it must: (i) have had a supplier that couldn’t make deliveries of critical goods or materials due to a government order; and (ii) couldn’t procure those critical goods from an alternate source.

Faulty or weak supply chain arguments without a supporting governmental order are a red flag.

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Failure to accurately apply the full-time employee (FTE) count test may invalidate your ERC claim.

This is often caused by the nonapplication of the aggregation rules (requiring that certain related entities must be treated as a single employer) and incorrectly utilizing the count for the single entity versus the FTE count for the aggregated group.

Failure to accurately apply the full-time employee (FTE) count test may invalidate your ERC claim.

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Failure to avoid double-dipping on ERC and PPP Wages as many ERC mills either purposely or unknowingly fail to ensure that none of the employer’s PPP-covered wages are used to calculate ERC-eligible wages.

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Misapplication of large employer credits, enabling sizable corporations (i.e., over 500 FTEs in 2019) to claim credits on wages paid to employees that fall outside of the purview of not performing services;

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Relying on a revenue decline within a business segment rather the overall company (or aggregated group); and Other vague arguments (e.g., not tied to a specific governmental order).

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Tax Credit Controversy

Employee Retention Credit (ERC) Audit Resolution

Sagemont Advisors' Tax Credit Controversy

Drawing from the insights of our professionals at Sagemont Advisors, there are key areas where unknowing taxpayers can be subject to the pitfalls of misguided advice or inadvertently file improper claims.

Improper reliance or overapplication of the partial suspension of operations eligibility test, such as relying on any of the following arguments to support a partial suspension of operations may put your eligibility position at risk:

Improper reliance or overapplication of the partial suspension of operations eligibility test, such as relying on any of the following arguments to support a partial suspension of operations may put your eligibility position at risk:

Faulty or weak supply chain arguments without a supporting governmental order are a red flag.

Faulty or weak supply chain arguments without a supporting governmental order are a red flag.

Failure to accurately apply the full-time employee (FTE) count test may invalidate your ERC claim.

Failure to accurately apply the full-time employee (FTE) count test may invalidate your ERC claim.

Failure to avoid double-dipping on ERC and PPP Wages as many ERC mills either purposely or unknowingly fail to ensure that none of the employer’s PPP-covered wages are used to calculate ERC-eligible wages.

Failure to avoid double-dipping on ERC and PPP Wages as many ERC mills either purposely or unknowingly fail to ensure that none of the employer’s PPP-covered wages are used to calculate ERC-eligible wages.

Misapplication of large employer credits, enabling sizable corporations (i.e., over 500 FTEs in 2019) to claim credits on wages paid to employees that fall outside of the purview of not performing services;

Misapplication of large employer credits, enabling sizable corporations (i.e., over 500 FTEs in 2019) to claim credits on wages paid to employees that fall outside of the purview of not performing services;

Relying on a revenue decline within a business segment rather the overall company (or aggregated group); and Other vague arguments (e.g., not tied to a specific governmental order).

Relying on a revenue decline within a business segment rather the overall company (or aggregated group); and Other vague arguments (e.g., not tied to a specific governmental order).

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