Email Adam Email
Financial
Mar 17, 2023

Beware of ERC Credit Mills

Sponsored Content provided by Adam Shay - Director of VCFO Services, Red Bike Advisors

Most business owners are aware of the Employee Retention Credit (ERC) - a payroll tax credit for continuing to pay employees during times of revenue drop or Covid impacts to a business in 2020 and 2021.  Most marketing of this credit is not coming from the business owners’ tax advisors, but from online ads, text messages, LinkedIn messages, emails, etc. that are pushing for them to get their share of government money.  Unfortunately, most of the companies that are aggressively promoting these services are encouraging business owners to claim the ERC credit when they are not eligible—they just want to generate their fees and let the business owner deal with the fallout.  There’s not a week that goes by where a marketer (apparently unaware of my occupation) sends me some sort of message.   

What is the Employee Retention Credit (ERC)?

ERC is a payroll tax credit for employers impacted by drops in gross revenue (50% Q2-Q4 2021, 20% Q1-Q3 2022).  There is also the potential to claim the credit based upon government order shutdowns or supply chain issues from government shutdowns.  The same wages cannot be used for Paycheck Protection Program (PPP) forgiveness and the employee retention credit.  Owner or relative wages generally don’t qualify for ERC.

When you claim the credit you must reduce your payroll expense income tax deduction. This typically means that previously filed income tax returns need to be amended.

What is it not?

ERC is not a blanket credit or government handout for every business owner because of Covid impacts and shutdowns.  The IRS has recently made it clear that they intend to focus enforcement efforts on the ERC and especially on ERC credit mills that are playing fast and loose with the qualification rules.

What happens if I claim an invalid credit?

You may have to pay back the credit plus penalties.  In the worst case scenario you have to pay back the ERC credit and lose wage deductions on your income tax return.

What should I do if I receive an ERC Audit?

Engage a firm, like ours, that is well versed in both ERC and Tax Issue Resolution.

Our goal today was to educate you about the Employee Retention Credit as well as the risks associated with it.  If you are seriously interested in ERC, discuss it in detail with a tax advisor that can evaluate the specifics of your situation.  You should not be afraid to take the credit if you qualify but you also should approach a company you don’t know promising you thousands of dollars in credits with your eyes wide open.

Other Posts from Adam Shay

Redbikeadvisors block[55]
Ico insights

INSIGHTS

SPONSORS' CONTENT
Ccoudrietheadshot 942542742

Budget Process Demonstrates Collaborative Efforts Across County Government

Chris Coudriet - New Hanover County Government
Jasonpathfinder3

Trump Account Update: What Parents Need to Know in 2026

Jason Wheeler - Pathfinder Wealth Consulting
Untitleddesign7

What Does an HOA Do? Responsibilities Explained Simply

Dave Orr - Community Association Management Services

Trending News

Former Walk On's Space Changes Hands For $3M

Emma Dill - Jun 2, 2026

Novant, UNC Health Prepare Competing Bids For Hospital Beds

Cierra Noffke - Jun 1, 2026

Wilmington Venture Platform Strikes Strategic $1.3M Deal

Cierra Noffke - Jun 2, 2026

Endowment Announces Four New Youth Grants

Staff Reports - Jun 2, 2026

Thomas Construction Group Hires Clarke, Drose

Staff Reports - Jun 2, 2026

In The Current Issue

CEA Nonprofit Winner: Beach Town Masters Mural Art

By turning blank business corridor walls into canvases for colorful stories, the Carolina Beach Mural Project gives everyone – locals and to...


Solving A Hotel Room Shortage

Downtown Wilmington's shortage of hotel rooms has led some visitors and convention participants to choose a unique option — renting a houseb...


CEA Manufacturing + Distribution Winner: Koolbridge Offers Energy Solutions

The Koolbridge Solar Smart Load Center, Koolbridge’s flagship product, is an innovation in home energy management, officials said....

Book On Business

The 2026 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2024 Power Breakfast: The Next Season