What are the key takeaways affecting you?
During the hearing, it was stated that funding from the Inflation Reduction Act is allowing the IRS to address some of the issues plaguing the ERTC. The IRS is clearing the backlog and is focusing on fair enforcements for the ERTC. They are interested in moving it to digital filing. Tax preparers should plan to see continuing discussion of the ERTC. Clients who were targeted by fraudulent ERTC mills will be an ongoing concern for preparers.
Most pertinently, preparers will need to balance guidance released by the IRS’s Office of Professional Responsibility on March 7, 2023 stating, “[i]f the practitioner cannot reasonably conclude that the client is or was eligible to claim the ERC, then the practitioner should not prepare an original or amended return that claims or perpetuates a potentially improper credit.” In declining to amend the return, the question then turns to the fees that were paid to the ERTC mill for the application. Can the fee be claimed as a business deduction? Roger asked for additional guidance or clarification from the IRS on this deductibility issue to help both tax practitioners as well as taxpayers.
