The IRS is considering advice for those who incorrectly claimed the tax benefit after receiving a deluge of business filings using a pandemic-era tax credit.
During the Covid-19 outbreak, the employee retention credit was developed to aid small enterprises.
Concerns Over Deception In Small Business Tax Credit
The credit, which is worth up to $5,000 per employee for 2020 or $28,000 per employee for 2021, can still be claimed by making necessary changes to tax filings.
According to experts, the chance has led to a surge of specialized companies deceivingly telling business owners they are eligible for the complex tax advantage.
National Taxpayer Advocate Erin Collins stated this month at the annual meeting of the American Institute of Certified Public Accountants, I do think folks were misled.
She said that some people may have already gotten refunds after claiming the credits.
The IRS issued a warning to company owners in October over third parties pushing the employee retention credit, and it has just updated that warning by including the matter on its annual list of the Dirty Dozen tax frauds for 2023.
According to the most recent IRS Data Book, as of March 3, slightly over 866,000 businesses had applied for and been granted employee retention credits worth more than $152.6 billion.
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IRS Reports 537,000 Form 941-Xs Pending
Businesses must use Form 941-X, the modified employer’s quarterly federal tax return, to alter their returns in order to be eligible to claim the employee retention credit for 2020 or 2021.
According to the IRS, there were about 537,000 unprocessed Form 941-Xs as of June 14.
Collins stated that the IRS is developing instructions for taxpayers who might have incorrectly claimed the credit.
She said to ineligible filers to start considering ways to undo this if they learn they don’t qualify in an interview with CNBC at the beginning of June.
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