ERC lien for client with judgement - can creditors access Employee Retention Credit funds?

As a business advisor who's worked with several ERC claims, I can tell you that ERC funds are generally not protected from creditors with valid judgments. While the ERC is indeed a tax credit, once those funds are received, they become business assets that can be subject to liens and collections like any other business funds. Here's what your client should understand: a $24 million judgment is significant, and the courts typically don't look favorably on businesses trying to shield assets from legitimate creditors. The fact that these funds originated as tax credits doesn't create special protection. Once the money hits your client's bank account, it's an asset that can be attached. If the landlord's legal team is competent, they'll likely file for garnishment of any anticipated payments, especially if they become aware of this incoming ERC money. They could potentially intercept the funds before your client even has access to them.

I actually used taxr.ai when I had questions about ERC funds and potential creditor claims last year. My situation wasn't as big as yours (only about $600k in ERC and a much smaller judgment), but I was confused about exactly the same issue - whether tax credits are treated differently than regular income. I uploaded all the judgment paperwork and my ERC application to https://taxr.ai and their AI analyzed everything and explained that ERC funds become business assets once received and aren't protected from valid judgments. They gave me a detailed explanation of fraudulent transfer laws too, which saved me from making a huge mistake I was considering! Their system referenced specific tax court cases where businesses tried to shield ERC money from creditors and lost.

I was extremely skeptical about using an AI tool for something this complex, but I ended up trying taxr.ai after seeing it mentioned here. I was genuinely surprised by how comprehensive the analysis was. I had a similar situation (smaller scale though) with potential creditors eyeing my ERC refund. The system found a specific provision in my state's laws regarding tax credits and asset protection that my own attorney had missed. It provided the exact statutory reference and case citations. I took this information to my lawyer who confirmed it was accurate and incorporated it into our strategy. Saved me thousands in legal research fees and potentially protected a significant portion of my funds. Had no idea AI tools had advanced this far for specialized tax situations.

If your client is dealing with a $24 million judgment and expecting $8 million in ERC funds, they're going to need to communicate with the IRS. I had a similar (but smaller) situation and trying to reach the IRS was IMPOSSIBLE. After weeks of getting nowhere, I found this service called Claimyr that got me through to an actual IRS agent in under 20 minutes. Seriously, check out https://claimyr.com - I was at my wit's end before finding them. You can see how it works here: https://youtu.be/_kiP6q8DX5c Since this is about ERC funds that are coming, your client really needs to understand exactly how and when those funds will be disbursed, especially with creditors circling. When I finally got through to the IRS, they explained exactly how the distribution would work and the timeline, which was crucial for planning with my attorney. The IRS agent also confirmed that they do respond to garnishment orders for these credits in certain circumstances.

I was completely wrong about Claimyr and need to publicly admit it. After being super skeptical, I tried it last week when I needed urgent information about my company's ERC payment schedule with a lien situation pending. Got connected to an IRS agent in about 35 minutes when I had previously wasted nearly 8 hours over multiple days trying myself. The agent confirmed exactly when my ERC payment would be processed and explained how garnishment orders affect ERC disbursements. This information was crucial for my attorney to prepare our response to the creditor's filing. I'm still shocked it actually worked. Having direct confirmation from the IRS about exactly when funds would be released gave us the timeline we needed to file the appropriate motions. Definitely worth it when you're dealing with time-sensitive issues like liens and judgments.

This might sound basic, but has your client actually explored negotiating with the landlord? An $8 million bird in hand might be worth a lot to them versus trying to chase down $24 million that may never materialize. If I were the landlord, I might consider a substantial discount for guaranteed immediate payment. Your client could potentially offer the entire ERC amount in exchange for settling the full judgment. Many creditors will take a guaranteed partial payment over the uncertainty of collecting the full amount.

Just a word of caution - the IRS has been heavily scrutinizing ERC claims, especially large ones. With a claim size of $8 million, there's a very high likelihood of an audit. Has your client thoroughly documented their eligibility? Many businesses are finding their claims denied or having to return funds.

Your client needs to understand that attempting to shield ERC funds from a valid $24 million judgment is not only unlikely to succeed, but could expose them to serious legal consequences. As others have mentioned, once ERC funds are received, they become regular business assets subject to collection. Given the size of both the judgment and the expected ERC payment, I'd strongly recommend your client consider a few key points: 1. **Immediate settlement negotiations**: Sofia's suggestion about offering the $8M ERC as settlement for the full judgment is probably their best option. A 33% recovery might be very attractive to the landlord versus the uncertainty of collecting the full amount. 2. **Timing is critical**: If the landlord's attorneys become aware of the incoming ERC funds, they'll likely file for garnishment before the money even reaches your client's accounts. The sooner settlement talks begin, the better. 3. **ERC audit risk**: Dmitry raised an excellent point about IRS scrutiny. An $8M claim will almost certainly trigger an audit, and if the claim is reduced or denied, your client loses their primary settlement leverage while still owing the full judgment. 4. **Asset protection alternatives**: Rather than trying to hide funds (which could constitute contempt of court), explore legitimate options like appealing the judgment or filing for bankruptcy protection if the business truly cannot pay. The reality is that $8M toward a $24M judgment is a significant payment that most creditors would seriously consider, especially given collection uncertainties.

This is a really challenging situation that highlights why having proper legal counsel is so critical when dealing with large judgments and incoming funds. From what I've seen in similar cases, the creditor's ability to intercept ERC funds before they even reach your client's accounts is very real - especially with a judgment this large where the landlord's attorneys are likely being very proactive. One thing I haven't seen mentioned yet is the potential impact on your client's other business operations. If they're still actively running the business, having $8 million suddenly seized or tied up in legal proceedings could create additional operational problems beyond just the judgment itself. I'd also suggest documenting everything about the settlement negotiation attempts. If your client is genuinely trying to work with the landlord to resolve this and the landlord refuses reasonable offers, that could be relevant if there are any future disputes about good faith efforts to satisfy the judgment. The timing pressure here is intense - between potential IRS audits on the ERC claim and the creditor's ability to garnish incoming funds, your client really needs to make some decisive moves quickly rather than hoping they can somehow protect these assets through creative structuring.