Our Letter To The House Ways and Means Committee Hearing
The U.S. Ways and Means Committee’s July 27th hearing on the Employee Retention Tax Credit focused on, in their words, “confusion, delays, and fraud.” This is an unsettling description of the program, especially considering how small and medium businesses are relying on it for much needed and well deserved money. The hearing found that paper forms, confusing guidelines, and tax mills all added to the chaos. While these factors did not help, it does not mean that the ERTC is a failed program, nor that it is impossible to avoid confusion, delays, and fraud.
Confusion
The ERTC was designed to be accessible for businesses, even if they had not been completely shut down by COVID-19 restrictions. In order to reach as many businesses as possible across many industries and states, the ERTC’s language is vague. Unfortunately, this caused confusion among business owners and tax preparers alike. Even the name is misleading: it’s not actually a tax credit, but instead based on the payroll of the business. There are few consulting firms that specialize in the ERTC, since it’s such a new program, meaning it can be difficult for businesses to get sound advice on whether or not they qualify for the ERTC. The confusion amongst business owners can make them reluctant to apply at all. To make matters worse, the confusion amongst consulting firms that do not specialize in the ERTC can mean that businesses’ applications could be prepared poorly, and/or not ask for the full amount that they’re entitled to.
Delays
Delays by the IRS are out of business owners’ control. But a well-prepared and accurate form can reduce the amount of time the IRS needs to spend reviewing a business’s application and parsing through details. The few consulting firms that do specialize in the ERTC are well-equipped to create an application that is easy to read and verify for the IRS. While it was debated in the hearing how much the IRS has exactly reduced the backlog, the IRS has been able to process forms faster now than during the pandemic when they were shut down and were unable to access the paper forms...
Fraud
Like with any program that offers financial benefit, the ERTC has invited fraud. The vast majority of business owners are not trying to commit fraud through the ERTC, and may be reluctant to apply at all for fear of being investigated for fraud. The best way to avoid inadvertent fraud under the ERTC is to thoroughly prepare one’s application. The more accurate and clear details demonstrating a business’s eligibility, the better — but as mentioned before, many businesses are unsure of how they qualify and how to prove it. The witnesses and Congress members mentioned tax mills with little to no clarification of what they were, and did little to differentiate fraudulent tax mills from legitimate consulting firms. A tax mill, according to the IRS, can be identified by the following: unsolicited and aggressive marketing, claiming that there is “nothing to lose,” claims that eligibility can be determined in minutes, large upfront fees, and so on. A legitimate firm would carefully review eligibility, work closely with the business owner in examining receipts and other “proof” of eligibility, and follow IRS guidelines with transparency to the business owner throughout the entire process.
That’s where a consulting firm with extensive ERTC experience, such as Boston Growth Partners, can help.
BGP can eliminate confusion, and will meet with a business owner multiple times to confirm eligibility, explain the process plainly, and ensure that the application is done thoroughly. This will help businesses receive the money they need, and reduce delays by the IRS’s application review. For more information, visit www.bostongrowthpartners.com or email cfo@bostongrowthpartners.com.
