A word of warning on the ERC

About a year ago, my company was approached by a large tax credit processor about the Employee Tax Credit (ERC) program. Like a lot of small businesses, they promised us an extremely large refund based on short phone call and wanted to take a percent of the amount recovered. It smelled fishy to us, so we went to our CPA who told us that there has been a wave of questionable ERC claims, and they risk being clawed back by the IRS. We ended up applying for the ERC the hard way: by triple checking our numbers, being conservative and only applying for what we could qualify for based on our audited financials. This ended up being much smaller number than originally promised, but I sleep much better knowing we did it by the book.

If you're contemplating a stock purchase and the company took the ERC, it would be wise to look into their application. Here's a couple quick red flags to look for:
- The processor advertises an "easy application" or that the applicant can be eligible within minutes
- The processor is not a traditional CPA firm
- The processor took a % of the credit recovered
- The company qualified based on 'business interruption' and not 'decline in sales'