The Internal Revenue Service has
"We hope this moratorium will send a strong signal to anyone using these promoters that they are putting themselves at risk," said IRS Commissioner Daniel Werfel during a news conference last week. "We want businesses to step back and talk to a trusted tax professional, not a promoter out looking to take a big chunk of a refund."
It's not only the IRS that's been inundated with questionable claims for the tax credits. CPA firms have been hearing from businesses whose refunds have been held up, as well as business owners who have been relentlessly contacted by the promoters seeking their business. They're wondering if they can claim the credit, or if they will be penalized.
"There are a variety of really legitimate reasons why they didn't take advantage of the credit during that window, and they're still looking at it," said Jen Rohen, a principal at top 10 Firm CliftonLarsonAllen. "They wanted to get comfortable with it and feel good about it. For us, it's been challenging, though, because there are some that we've talked to, and we've said we just don't see a path to eligibility for you."
"We're really trying to be the steady hand on the wheel when they're getting bombarded with constant interaction from the radio, television, phone calls and emails, and fake mailers from companies posing as the IRS saying this is your refund check," she continued. "Then they call us and ask us what can we do, and in many instances, we have to deliver the news that we can't get comfortable with eligibility, and we can't advise them to put themselves at risk of penalties and interest and repayment and any of the other consequences if you do take the credit."
The IRS is encouraging businesses to go to legitimate tax professionals as the moratorium on new claims goes through at least the end of the year.
"Folks still want to believe things that are too good to be true that are coming from the tax credit mills," said Rohen. "It was nice that the IRS, while having delivered a strong message over the last year, really said, 'OK, listen up, folks, we are going to put our money where our mouth is behind the message and put a moratorium on this so that we can stop the harm that's coming to business owners who are just falling for these scams.' We support it and really appreciate the reinforcement."
"We are upset, though, for our clients who have to wait a little bit longer, who are experiencing delays, small-business owners that were legitimately impacted and are legitimately eligible for the credit, and they're going to have to wait a little bit longer for the refunds because of this process," she noted. "But we also feel like once the door closes on some of these credit mills, legitimate, qualified tax professionals will still be able to get in those claims for the open opportunities that haven't been covered, and it will give us a window to go back and correct some of the errors or some of the risk that's been created by these scams."
Tax professionals are expecting to see further guidance coming out from the IRS on a possible settlement program. In the meantime, they are being urged to follow the
"I'm excited to see what the IRS says, and what they will do to incentivize employers to make that correction," said Rohen. "While we'd like to think the IRS is going to do that out of the goodness of their heart, there's going to have to be some give and take. Maybe they will waive interest or penalties or have some incentive for folks to come forward and return money that wasn't necessarily theirs to claim in the first place."
Accountants will now need to worry about correcting the financial statements of their clients, she said.
"When we do the audited financial statements for clients who have fallen prey to somebody's scams, we have to note on the financial statement that we feel like that's an uncertain tax position," said Rohen. "We worry about our clients who pay these exorbitant fees to the credit mills who aren't necessarily entitled to it and have to report it on their financial statements. I'm excited that the IRS is going to put a stop to it, especially because it seems like the credit mills have been more aggressive in their marketing as the statute starts to close for many returns."
To claim the 2020 credit, clients have until April 15, 2024, and to claim the 2021 credit, they have until April 15, 2025 to amend their returns, Rohen noted.
"That's why we're seeing the uptick in that marketing push," she said. "The credit mills are trying to get every squeeze of the lemon before the window closes, and that's why they're pushing even harder."
