ERC Employee Retention Credit Expenses paid to consultants and timing of deduction

Forum|Forum|3 years ago
June 26, 2023
3 replies
13 views

Hi, I can't find any rules on the timing of deduction for fees paid to collect the ERC refunds. Is there a rule anywhere that would allow the expense to offset the refund received? Or is it professional fees in the year paid?

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qbteachmt

Level 15

Year paid.

They already have the offsetting credit; it's part of wage/tax reduction.

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swiztaxproAuthor

Level 2

The credit is income via wage expense reduction in year wage was paid, 2020 or 2021. The expense to collect that credit is large, and should be used as an expense to receive income in that year as well. I can't find any rules stating this is ok but looking for one.

dd4vols

Intuit Community Champion

"The expense to collect that credit is large, and should be used as an expense to receive income in that year as well."

The checks to pay the ERTC consultants are treated just exactly as a check paid in January for goods & services consumed/used in December. If a 'cash basis' taxpayer, the dates of the checks are the guiding factor. doesn't matter if it's $1.00 or $100,000. Logic and fairness have never been the calling cards of the IRS. I suppose if a client was an accrual basis taxpayer, you might could match them up. Just so happens that all the clients I did (about 30 or so), were all cash basis.

About 1/2 of mine have rec'd their refunds in this calendar year. I am convinced that now, and the IRS would never admit this, that any claim below a certain threshold gets just an automatic approval and checks disbursed. Clients are ultra happy to get the 'interest' part of the checks but stunned when they get the interest assessment on the new tax liability caused by smaller wages expenses in those years.

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