The Internal Revenue Service (IRS) shared five new warning signs that the agency has seen on incorrect claims for Employee Retention Tax Credits. The five warning signs cover: (1) essential businesses during the pandemic that could fully operate and did not have a decline in receipts; (2) businesses that are unable to support how a government order fully or partially suspended their business operations; (3) businesses that reported family members’ wages as qualified wages; (4) businesses using wages already used for Paycheck Protection Program loan forgiveness; and (5) large employers claiming wages for employees who provided services.
The IRS encourages businesses with previously approved claims to review the filings as the IRS intensifies its ERTC compliance efforts. Businesses are encouraged to act soon to resolve incorrect claims to avoid future issues such as audits, repayment, penalties, and interest.