Erin M. Collins, National Taxpayer Advocate
Currently, there’s a backlog of Forms 941-X, known as the adjusted employer’s quarterly federal tax return, which businesses must use to amend returns to claim the employee retention credit for 2020 or 2021. As of June 14, there were roughly 537,000 unprocessed Forms 941-X, according to the IRS.
Collins said the IRS is working on guidance for filers who may have wrongly claimed the credit.
“I think now there’s a bit of buyer’s remorse,” she told CNBC in early June, noting that ineligible filers should start thinking about “ways to undo this” if they realize they don’t qualify.
“The biggest thing is to come forward first,” said Rosemary Sereti, managing director of Deloitte Tax and a former IRS senior executive, speaking to CNBC about employee retention credit mistakes. “Once [the IRS] comes to you, it’s a little too late.”
Of course, the current backlog of Forms 941-X also includes a lot of “legitimate claims” for the employee retention credit, which have been delayed as the IRS reviews the filings, Collins said. The IRS website says the agency is working on the inventory at two sites with “trained staff” to review possible Covid-19 credits.
If you wrongly claimed the employee retention credit, you may be subject to an IRS penalty, according to Debra Estrem, managing director of private wealth controversy at Deloitte Tax, who also worked at the IRS Office of the Chief Counsel.
She said you may be subject to the “erroneous claim for refund or credit penalty,” which is typically 20% of the excess amount claimed. But the type of penalty depends on whether the error occurred on the original filing or an amended return.
Image and article originally from www.cnbc.com. Read the original article here.