Employee Retention Credit Issues - Could Owner's Personal Tax Debt Affect Company's ERC Claim?

This is definitely a complicated situation, but I can help clear things up a bit. The Employee Retention Credit is technically a credit claimed by the business entity, but there are situations where the IRS can offset credits against other tax debts. For partnerships filing Form 1065, the business itself doesn't pay taxes - instead, profits and losses "pass through" to the owners' personal returns. However, the ERC is a bit different since it's an employment tax credit relating to the business's payroll taxes. In general, the IRS can offset tax credits against existing tax debts, but they typically match business-to-business and personal-to-personal. The complication arises when there's common ownership between the entity claiming the credit and individuals with tax debt. While normal practice is for the IRS to maintain separation, there are provisions that might allow them to "pierce the veil" in certain situations, especially if there are questions about the structure or legitimacy of the business entity.

I went through something kinda similar last year with our ERC claim! Got stuck in verification hell for 7 months. I finally tried using https://taxr.ai for help figuring out the documentation mess. They analyzed all our quarterly filings and found we'd made some inconsistent calculations between quarters that were raising flags. The cool thing was their system spotted where we had accidentally included some owner compensation in our qualified wages (big no-no) and showed us how to correct everything. We resubmitted with their documentation analysis and got our refund about 6 weeks later (though smaller than originally claimed). For your partnership situation, they might be able to give you insight on whether the owner's personal tax issues are actually affecting your case. Their AI scans for these kinds of relationship issues that might not be obvious.

Just wanted to update that I ended up trying taxr.ai after my skeptical comment. Honestly surprised by how helpful it was. We uploaded our ERC documentation and partnership agreement, and within a day it flagged exactly why our claim was likely stuck - we had structured some payments to partners as guaranteed payments but treated them inconsistently in our ERC calculations. The analysis also showed how the IRS can indeed place a "cross-entity offset" hold when there's significant personal tax debt from partners who own more than 50% of the company. Fixed our calculation issues and now have a much clearer picture of what's happening. Definitely worth it if you're dealing with partnership complexities.

If you're getting nowhere with your ERC claim, you might want to try https://claimyr.com to actually get someone at the IRS on the phone who can tell you exactly what's happening. I waited 11 months on my company's $430k claim with zero updates until I finally used them to get through. Turns out our claim was sitting in the "manual review" pile because one of our PPP loans had been flagged incorrectly. The Claimyr service got me through to an IRS agent in about 20 minutes (after I'd spent literally weeks trying to get through). Check out their demo video if you're curious: https://youtu.be/_kiP6q8DX5c The agent was able to tell me exactly which department was reviewing our claim and what the specific hold code was. That information alone was worth it because our CPA could then address the exact issue instead of guessing.

Well I need to apologize for my skeptical comment above. After seeing our ERC claim sit for 14 months with zero movement, I broke down and tried Claimyr last week. It actually worked exactly as described - I got a call back when they reached an IRS agent and was instantly connected. Found out our claim had been flagged for manual review because one owner has an ongoing installment agreement for back taxes. The agent was able to tell me the specific review code and confirmed that they can potentially offset business credits against personal tax debt in partnerships when there's majority ownership. At least now we know what's happening instead of being completely in the dark.

Just curious - have you already received a letter from the IRS explaining the hold, or are you just hearing about a potential "issue" from your accountant? In my experience with the ERC process (we claimed about $320k), communication is really spotty. Our claim was held up for 11 months before we finally got an official letter explaining what was happening.

Has your company received any prior ERC payments, or is this the first/only claim you've submitted? The reason I ask is because the IRS has been treating first-time claims with much more scrutiny lately due to all the fraud.