Believe it or not, it was all the way back in 1971 when Ray Tomlinson wrote the first program that allowed the users of the ARPANET system to communicate with each other. For the non-techies reading this post, this means that Tomlinson created the first email program on the first network. Then, around 1982, SMTP (Simple Mail Transfer Protocol) became the standard for sending and receiving emails, paving the way for commercial email products. By 1989, America was “Online,” and email software and platforms continued to improve and morph into something far more powerful and user-friendly than imaginable in the 70s. As someone on the frontline of tech support in the early 90s, it was an exciting time of innovation. One lesson that stuck with me since then is that email is a tool, and the person using it determines its use: good or evil.
In fact, it only took about seven years for Gary Thurek to find a way to exploit this new way to communicate, and in 1978, he sent what’s known as the first SPAM email. From Thurek’s perspective, he made millions of dollars in sales. From my perspective, it began an onslaught of uninvited solicitations cluttering my inbox. And since mid-2020, there’s one topic of SPAM email that doesn’t seem to stop: the dreaded ERC email. If you have not received numerous emails per week, consider yourself blessed. I get about five a week. With so much false information (fake news) out there on this topic, I wanted to clear things up.
What is the ERC
Per the IRS website, “The Employee Retention Credit (ERC) – sometimes called the Employee Retention Tax Credit or ERTC – is a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.” It is (or was) a legitimate tax credit from the US Government to help businesses impacted during the COVID-19 pandemic.
Who Qualifies?
The IRS created a checklist of three basic questions to help anyone determine whether or not their organization qualifies for the ERC.
- Did the organization have employees and pay wages to them between March 13, 2020, and December 31, 2021?
- During that time, were you a self-employed individual who didn’t have employees?
- Did the organization encounter a significant decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters (Jan. through Sept.) of 2021?
Before any organization thinks the meaning of “significant decline” is up for debate, the IRS has a definition. According to the IRS website, the qualifying test compares gross receipts of the calendar quarter from 2019 to 2020 to determine if receipts were 50% less. That’s a gross oversimplification of the qualification, but it’s easy to see that this program is for organizations that took a big financial hit due to the shutdowns during COVID.
Is It Still Available?
As of September 14, 2023, the IRS put a moratorium on processing new ERC claims through the rest of 2023. The IRS is continuing to process claims already submitted by organizations.
Why Pause The Program?
Dishonest people and organizations have been relentlessly marketing their services with the promise of maximum payout for the ERC program, even if the organization doesn’t qualify. The IRS Commissioner said, “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in.” Most ERC emails to churches are from opportunistic charlatans who take advantage of unsuspecting churches and other organizations by falsifying the information to get “free” money, and the IRS is now investigating these claims. The ERC is a tool designed to help organizations significantly impacted by the COVID shutdowns, but people are misusing this tool and causing damage.
The way in which bad actors are using the ERC reminds me of how Tomlinson created a program to communicate over the first network. He saw the potential for good in this new tool. And like any tool, the user decides if it is used for good or with malicious intent. ERC scammers are not using a tool for the intended purpose; it’s like using a sledgehammer to clean a window. Churches, beware of the SPAM emails promising riches from the ERC program; it could be the wrong tool.
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