Florida businesses face scam risk in pandemic tax credit program
The Internal Revenue Service recently announced it would pump the brakes on the Employee Retention Credit which was designed to help businesses stay afloat during the pandemic.
Why it matters: Experts hope it will ward off scammers who have used aggressive marketing tactics to make money off businesses that don't meet the program's narrow criteria.
Quick take: The news comes as a relief to Tampa-based ERTC Express, one of many companies formed to help businesses navigate the complex process of filing for the tax credit.
- Co-founder John Souza told Axios he's watched with mounting frustration as bad actors within his industry have tricked business owners into believing they're eligible for the program.
- That leaves businesses on the hook for financial penalties if an IRS audit determines their claim was fraudulent.
State of play: Millions of claims have poured into the IRS since Congress created the program in March 2020 to help businesses hurt by COVID shutdowns.
- The IRS will stop processing new claims through the end of the year while officials pore over files to check for compliance, doubling the average processing time to 180 days.
- Thousands of claims have been referred for audits, and federal officials have opened more than 250 criminal investigations involving $2.8 billion in possibly fraudulent claims.
What they're saying: "We should see only a trickle of employee retention claims coming in. Instead we are seeing a tsunami," IRS Commissioner Danny Werfel said, according to the Washington Post.
- "The ads are everywhere. The program has become the centerpiece for unscrupulous marketing that profits from pushing taxpayers to claim credits that they may not be eligible for."
How it works: Determining whether a business qualifies for the program and, if so, how much money they're entitled to, is a tedious process, Souza said.
- It takes his firm's team of accountants up to 30 days to sort through how shutdowns impacted a business' operations and revenue, whether the business had already received a Payment Protection Program loan, and other factors.
- "It's an exhaustive list," Souza said.
- Meanwhile, less scrupulous companies advertise that they can conduct that analysis in a matter of minutes and require business owners to vouch for their own eligibility.
Zoom in: At least three Tampa Bay area businesses have received assistance under the program, said Greg Manning, a business consultant with the Florida Small Business Development Center at the University of South Florida Muma College of Business. Several more are waiting to hear back from the IRS.
The bottom line: "It can have a huge impact," said Manning, adding that the businesses he helped got back between $15,000 and $250,000.
- "Businesses are oftentimes still struggling, still trying to find their way back from COVID, and any capital to help their business succeed and grow and thrive in some cases is good."
More Tampa Bay stories
No stories could be found
Get a free daily digest of the most important news in your backyard with Axios Tampa Bay.