CPAs, the ERC, and the High Stakes of Getting It Wrong: Why You Should Consider a Tax Attorney
The Employee Retention Credit (ERC) has been a cornerstone relief measure for many businesses grappling with the economic impacts of the COVID-19 pandemic. Certified Public Accountants (CPAs) are often the go-to professionals for tax-related advice. Yet, the intricate complexities surrounding the ERC mean that the potential for error is heightened. This article sheds light on the risks CPAs face concerning the ERC and the pivotal role of tax attorneys in this scenario.
Potential Pitfalls for CPAs When Advising About ERC Eligibility:
1. Malpractice and Lawsuits:
CPAs have professional obligations to to their clients. Wrongfully advising a client that they are eligible for the ERC is a major concern for CPAs and thus, many take a very conservative position and simply tell their clients that they do not qualify without doing the deep dive that is needed to make a proper determination reqarding qualification for the ERC. However, wrongfully disqualifying a business that is rightfully eligible for the ERC is not just an oversight; it’s a breach of professional duty. Such missteps can also lead to malpractice claims.
Repercussion: Malpractice claims can result in monetary penalties, a tarnished reputation, and even legal action against the CPA.
2. Regulatory Backlash:
Providing incorrect tax-related advice, knowingly or unknowingly, can invoke penalties from regulatory authorities like the IRS. As a result, CPAs are often very reluctant to advise clients to move forward with anything other than the most conservative of tax positions. While the CPA may think he or she is simply protecting the client, the CPA may be inadvertently depriving the client of substantial deductions or, in this case, tax credits. Or, worse, a CPA may be inaccurately advising that a client is eligible when the client is not eligible.
Repercussion: CPAs might face severe monetary penalties or even risk the loss of their professional license.
3. Ethical Breaches:
The accounting profession is anchored in trust. Offering inaccurate information, especially concerning substantial financial relief like the ERC, can be seen as a breach of the profession’s ethical standards.
Repercussion: Sanctions from professional bodies, coupled with diminished standing in the industry.
Fee Structures for ERC Services:
While CPAs provide invaluable services, there are clear guidelines when it comes to compensation, especially for tax-related services:
– Fees should reflect the services rendered.
– The AICPA’s Code of Professional Conduct prohibits contingent fees for preparing original tax returns, which includes ERC filings.
– Fee transparency is paramount to maintain trust and avoid potential disputes.
Why a Tax Attorney is the Right Choice for ERC Filing:
Given the high stakes surrounding the ERC, it’s prudent for CPAs to consider collaborating with, or directly referring clients to, a licensed tax attorney, like Biz Head Law. Here’s why:
1. ERC Audit Defense:
Tax attorneys often provide free audit defense, underlining their confidence in the validity of the claim. This ensures that the business is not left in the lurch during IRS scrutiny.
2. Expertise with Complex Claims:
Tax attorneys study and focus practice in the intricate landscape of tax law, ensuring a more in-depth understanding of the nuances of claims like the ERC.
3. Legal Safeguard:
In case of disputes, having a tax attorney who’s ready to defend their claim to the IRS can be invaluable. Their expertise offers a legal safeguard that goes beyond the traditional role of a CPA.
The ERC landscape is rife with complexities. CPAs, while experts in many areas of tax and accounting, may not always have the deep understanding of nuanced area of the tax code and other statutes required for such intricate claims. Partnering with, or referring clients to, a dedicated tax attorney ensures not just the highest level of expertise, but also a legal defense mechanism should disputes arise. In the high-stakes world of the ERC, it’s a collaboration that can make all the difference.
Note: This article is for informational purposes only and does not constitute legal or professional advice. Always consult with legal and professional experts before making decisions.
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With the help of the tax attorneys at Biz Head Law, businesses can quickly determine if they are qualified for this powerful incentive. In just 10 minutes or less, they are also provided with an estimate, which can be up to $7,000 per quarter for each of the first three quarters of 2021 and up to $5,000 for 2020 for a total of $26,000 per full-time W2 employee under the CARES Act.
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