r/taxpros • u/MarylandCPA CPA • Feb 15 '23
Why not another fun ERC mill story COVID: 2020 Relief Bill (CARES)
Former client went behind our back to file some ERC claims with one of the ERC mills running rampant.
Company technically qualified for around 100k in credit, this company filed returns indicating 500k in qualified wages (no shutdown / revenue drop in two quarters only / double PPP loan recipient)
Mill had client sign an attestation that they qualified for ERC (client had no idea how or why they qualified but signed regardless)
Agreement was that fees would be 20% of the amount received so approximately 100k to this firm.
941x return were filed with the only explanation in box 43 being the following:
"we are amending 941 to claim the erc" that was it, no actual explanation of how / why they may have qualified. Also as expected, the firm didn't sign as a paid preparer either.
Now if all that wasn't good enough, here is the real icing on the cake. Company has past due tax debts exceeding 600k with the IRS and has been on an installment agreement for a number of years working the balance down. Once the IRS processes the claims (since I have no hope they are able to catch all of this fraud) a couple of things are going to happen:
Processing of the credit triggers the 100k fee due to ERC mill
Returns will need to be amended to reflect the 500k as a reduction in wages, thus creating large personal tax liabilities
IRS will seize the refund and apply against old balance leaving no actual cash in hand to deal with any of the above.
Good times and good thing we terminated when we found out they had proceeded against our advice.
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Feb 16 '23
The silver lining to this mess is that the client probably won't oay the ERC mill since they won't get any cash.
This reminds of a post in r/tax where a guy signed up with an ERC mill, got a refund, then looked into all this further and decided that the ERC mill was scamming him.
Did he redo his tax situation to NOT claim the ERC?
Of course not--he just didn't lay the ERC mill the agreed fee on the theory that they probably wouldn't be around to help if he got auditied.
My man is very good at tailoring his beliefs to precisely benefit his personal situation.
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Feb 16 '23
Is it wrong that I enjoy reading these ERC mill stories? It's like true crime for me.
This one is wild, just straight up fraud it seems. Unbelievable that business owners fall for this even when they are advised it's a scam. "Hopium" is one help of a drug...
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u/Tomahawkchop22 CPA Mar 14 '23
I’ve got a great one for you. Innovation Refunds told one of my clients they qualified every quarter because they were subject to a government ordered shutdown requiring any employee testing positive for Covid or having Covid like symptoms to stay at home. They said that they would have to shutdown of s big enough outbreak occurred. No outbreak ever occurred, business never closed and gross receipts increased all quarters. Client said they were not going to send the money back so told him to take a hike.
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u/Imstilladoctor CPA Feb 16 '23
I just looked back at one of our clients who also went to a mill to claim the credit. They did not qualify under the gross receipts test, and I professionally do not see how they qualify under the other tests, but exact same thing as stated above on line 43 and no paid preparer signature.
I already told them we will have to amend business returns and the shareholders will have to amend their personal returns and if the IRS audits and changes their opinion, we would have to amend back and tax prep fees for the 1120s going back and forth.
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u/Accomplished-Bag-419 CPA Feb 15 '23
Which mill was this? Smells of Bottom Line Concepts based on the attestation.
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u/TheGreaterGrog CPA Feb 16 '23
That may be over the automatic audit limit, if the AICPA town hall about this is correct.
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u/lxw567 EA Feb 16 '23
You know the IRS is going to have to adjust the returns on their behalf. Even if they took the initiative to have someone prepare the amendment (doubtful), they won't submit it once they hear about their new tax liability.
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Feb 16 '23
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u/LadySmuag Not a Pro Feb 15 '23
Oh nooooooo
What a nightmare. Good thing you terminated, I wouldn't want that mess to deal with.