Employee retention credit and professional responsibilities

The employee retention credit (ERC), established in 2020 by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, a refundable tax credit for businesses that paid employees while they were shut down due to the COVID-19 pandemic or had significant declines in gross receipts for the period between March 13, 2020, and Dec. 31, 2021, continues to be front and center on the minds of taxpayers and CPA practitioners. In response to requests from practitioners given the slew of ERC “mills,” the Office of Professional Responsibility (OPR) provided guidance on clients' claims for the ERC on returns prepared by others.

The OPR said in a bulletin that practitioners want to be sure that "they are meeting their Circular 230 professional responsibilities and the standards required to prepare and sign original tax returns, amended returns, or claims for refund" related to the ERC. The OPR administers and enforces Treasury Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10).

On this Tax Section Odyssey episode, April Walker, CPA, CGMA, Lead Manager — Tax Practice & Ethics, AICPA & CIMA, discusses the latest in the world of ERC with Chris Wittich, MBT, CPA, Partner — Boyum Barenscheer, and Dan Chodan, CPA, Partner — Trout CPA.

What you’ll learn in this episode

• Where things can go wrong in considering ERC eligibility (1.45)
• Red flags to watch out for when considering third-party ERC providers (5.00)
• IRS audit procedures and examinations of the ERC, including real-time information document request (IDR) examples (7.33)
• The OPR bulletin, Circular 230 and Statements on Standards for Tax Services (SSTSs) (12.44)
• Level of “auditing” a tax practitioner needs to do to examine third-party ERC calculations (17.56)
• The importance of ERC documentation and how to put numbers behind examples to hit home with clients (23.07)
• Final thoughts (29.57)

Related resources

• Employee retention credit guidance and resources — The rules to be eligible to take this refundable payroll tax credit are complex. This resource library will help you understand both the retroactive 2020 credit and the 2021 credit.
• Professional Responsibility and the Employee Retention Credit — Alert wherein ORP advised that to fulfill their professional obligations to clients and to tax administration, practitioners — attorneys, CPAs, and enrolled agents — must meet the applicable provisions of Circular 230.
• Statements on Standards for Tax Services (SSTSs) — Tax standards are the foundation for validating reputational integrity in the tax profession. These SSTSs are the enforceable tax practice standards for members of the AICPA.
• Treasury Department Circular No. 230 — Guidance, information, practice aids and other resources related to Circular 230, which govern a CPA’s practice before the IRS.

 Keep your finger on the pulse of the dynamic and evolving tax landscape with insights from tax thought leaders in the AICPA Tax Section. The Tax Section Odyssey podcast includes a digest of tax developments, trending issues and practice management tips that you need to be aware of to elevate your professional development and your firm practices.

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