A small Florida wholesaler thought it was getting a $3 million tax windfall. Now, it wants to return the money, but faces a $431,000 bill. The Internal Revenue Service isn’t the problem. The issue is with the company that helped the wholesaler claim a popular pandemic-era tax break, the Wall Street Journal reported. The dispute represents the leading edge of what is likely to be a wave of lawsuits tied to the employee-retention credit, or ERC, which was created by Congress to reward employers for keeping workers on payrolls during the pandemic. In December, the IRS rolled out a program that would allow employers to return 80% of the credit and avoid most penalties if they provided details about the ERC firm they used, part of an agency effort to crack down on what it says are fraudulent and ineligible claims. Now, the reckoning has begun. Colonial Wholesale Distributing, the Florida company, is one of at least four customers that have sued ERC Specialists, which promised to help taxpayers “file lightning fast” for the tax break. The legal battles go both ways: In recent months, ERC Specialists filed lawsuits against more than 40 of its customers, seeking to collect unpaid fees. ERC Specialists said it doesn’t comment on pending litigation. “There is rarely a need for collection efforts since we only charge if our customers receive money,” said co-founder Josh Zieglowsky, adding that the company has done so for fewer than one in 1,000 customers. Filing a lawsuit “is a tool of last resort” used only after six months of collection efforts, the company said.
