Employee Retention Tax Credit Updates

ERTC updates + resources from the National Council of Nonprofits:

Congress and the Internal Revenue Service are dedicating considerable attention to problems arising from processing and enforcement of the Employee Retention Tax Credit (ERTC), the pandemic-era refundable payroll tax credit intended to preserve millions of jobs. In late July, an oversight subcommittee convened a hearing, The Employee Retention Tax Credit Experience: Confusion, Delays, and Fraud, at which every witness expressed concerns over delays employers have faced in receiving promised relief. Linda Czipo, President and CEO of the New Jersey Center for Nonprofits, testified before Congress on the importance of the ERTC to the survival of charitable nonprofits, while also highlighting the damage being done by the “ERTC mills,” i.e., nefarious groups popping up seemingly everywhere that are erroneously promising free money from the government.

The National Council of Nonprofits submitted a detailed statement in support of the ERTC that, while acknowledging problematic payment delays and other challenges, also praised Congress for creating a lifeline for nonprofits by converting traditional income tax credits previously available only for for-profit entities into payroll tax credits available for entities not making profits. By highlighting how the ERTC “saved nonprofits and businesses, reduced unemployment and hardship, and helped alleviate untold suffering that would have occurred in our communities,” the statement makes the case for Congress to use the payroll tax credits approach in response to future disasters and economic crises.

The day after the congressional hearing, the IRS issued a new set of answers to Frequently asked questions about the Employee Retention Credit. The document provides answers to 20 of the most common questions about eligibility and application for the ERTC (also called “ERC” by the IRS). Working to beat back scam artists in “ERTC mills,” the first Q&A is succinct: “Q1. Is every business eligible for the Employee Retention Credit? A1. No.” The longest answer responds to the question: “How do I know if I’m being scammed by an ERC promoter?” The IRS claims that it has caught up on its backlog of ERTC claims and has announced that it is stepping up enforcement of fraudulent use of the tax credit.