Question: I am basically self- employed with my husband, and I keep getting alerts that I am missing out on a tax credit for paying employees during COVID-19. I think it’s a scam, but they look real and tax rules aren’t always logical. Are others getting these?
Answer: What you’re describing sounds like a scam exploiting the Employee Retention Credit, which is less available than aggressive, fee-based promoters promise, according to the Internal Revenue Service. The IRS opened its annual “Dirty Dozen” review of tax scams with a warning about schemes conning ineligible people to claim the credit, said Adam Brewer, a tax attorney in Hawaii and California.
“Be cautious. Don’t fall for solicitations about the ERC,” he said. The refundable credit is valuable if the business qualifies, but eligibility is strict and the IRS is on the lookout for fraudulent claims.
Plus, some come-ons are identity theft ploys, designed to steal the filer’s information.
Business owners wondering whether they qualify can review the topic on the IRS website (irs.gov) or consult their tax accountant or tax attorney, Brewer said. “Trust your local advice,” not an unverified social media post or email, he said.
The IRS website says that “eligible taxpayers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and Dec. 31, 2021.” To be eligible, the employer must have:
>> “Sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel or group meetings because of COVID-19 during 2020 or the first three quarters of 2021.”
>> “Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021.”
>> Or, “qualified as a recovery startup business for the third or fourth quarters of 2021.”
Q: I have a tax question that I can’t answer on the IRS website, and I can never get through by phone. I do my own taxes. Should I just file and then amend?
A: “I wouldn’t advise filing with the intent to amend,” Brewer said, as processing delays and unanswered questions could snowball. Strive to file an accurate return on time, with the best information available. You might need to consult a tax accountant or attorney, he said.
Otherwise, keep trying to reach the IRS and checking its website. Consider using tax preparation software, which guides filers through questions.
IRS Free File is one option, if your adjusted gross income is $73,000 or less. However you finish your return, the IRS tells filers to submit electronically, not by mail.
To answer another reader’s question, there’s rarely a need to confirm an answer found on the IRS website by speaking to a agency representative on the phone. For the general public, “the IRS person you get on the phone is just going to repeat what’s on the website,” he said.
Q: The IRS never processed my 2021 return. Should I file an extension for 2022?
A: No. “If your 2021 income tax return still hasn’t been processed, don’t let that prevent you from filing 2022 timely,” Brewer said.
The IRS offers this tip to ensure that a filer waiting for a 2021 tax return to be processed can successfully submit their 2022 return electronically: “Make sure to enter $0 (zero dollars) for last year’s adjusted gross income on the 2022 tax return. Everyone else should enter their prior year’s AGI from last year’s return.”
As for your 2021 return, you may need to resubmit it. Use the “Where’s My Refund?” tool at www.irs.gov/refunds to find out.
If all of the following apply, you must resubmit, preferably electronically: You are due a refund, you filed on paper more than six months ago and “Where’s My Refund?” does not show that the IRS received your return.
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