The Employee Retention Credit, or ERC, was intended to be a financial lifeline to small businesses struggling to make ends meet during the pandemic. The government program led to the emergence of an industry focused on helping businesses claim these credits, with some taking large percentages of the awarded refunds for their services.
The Employee Retention Credit was intended to be a financial lifeline to small businesses struggling to make ends meet during the pandemic. Some former employees said this could insulate Innovation Refunds from potential liability if ineligible businesses claimed the credit. Innovation Refunds doesn't sign off on the returns submitted to the agency — the independent tax partners and small businesses
"Our independent tax attorneys will work with your CPA to determine if your company is eligible," the ad said. In addition to these promotions, the company offered $1,000 gift cards to clients who referred other businesses that wound up filing, according to solicitation emails CNBC reviewed. "We believe we should see only a trickle of employee retention claims coming in. Instead, we are seeing a tsunami," Werfel told reporters on a media call Sept. 14.IRS Commissioner Danny Werfel testifies during the Senate Finance Committee hearing on the fiscal year 2024 IRS budget and the IRS' 2023 filing season, in the Dirksen Building in Washington, D.C., April 19, 2023.
Nine former employees and contractors spoke of a culture of aggressive sales or growth targets, with several noting incentives to stay and sell. An internal email CNBC obtained said all employees hired by March 31, 2023, were eligible for a $100,000 bonus payment if the company closed Former employees and contractors CNBC spoke with said most of the small businesses Innovation Refunds approved for the ERC credit were greenlit through the less clear-cut method, which it refers to as"limited commerce" on its website and in customer communications. Several former employees and contractors also told CNBC they understood limited commerce to be more"subjective" and encouraged many businesses to apply through this method.
CNBC also spoke with several Innovation Refunds customers who said they were enticed with large preapproval estimates from the company. In one instance, a potential customer was sent a preapproval notice for more than $300,000. The company gave these emails titles such as"Apply or Say Goodbye" and"Save your place in line" to encourage prospective clients to apply for the credit through Innovation Refunds.