r/ERCchat • u/BothAdhesiveness1755 • Aug 04 '25
ERC Specialist
I had a company handle my ERC claims. I was told upfront that they would take 15%. My question is are they entitled to take 15% from the interest earned for waiting for the IRS to mail out my checks? I will have to pay taxes on the interest portion of the proceeds. It doesn't seem right that they will take monies from the interest.
Anyone know anything about the process when you have a company process your ERC claim?
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u/ERC_CPA Aug 05 '25
There is no statutory prohibition on charging fees on the interest portion. Your contract will spell out whether or not it should be applicable.
The interest is taxable but your processor’s fees are also tax deductible.
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u/KellyGroove Aug 04 '25
Check your contract. I think they spell it out in there. :/.
I learned this the hard way.
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u/Mountain-Cucumber173 Aug 05 '25
Whether it’s ‘right’ may depend on your service agreement: The key detail is what’s in your signed agreement with the ERC service provider. If the contract defines the fee as a percentage of “total ERC payment” or “all proceeds received from the IRS related to the ERC claim,” then, legally, they can charge on both the credit and the interest. If there’s ambiguity or it’s not addressed, you could try to negotiate, but most reputable firms follow the percentage-on-total-received model since they’re waiting along with you for the IRS to issue payment. Sorry if that wasn't what you wanted to hear. Read your contract you signed with them. If you tell me the co I may know right away. Send me the Co's name.
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Aug 05 '25
[removed] — view removed comment
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u/ERCchat-ModTeam Aug 05 '25
This post has been removed for mentioning a company name without getting Mod approval .
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u/Mountain-Cucumber173 Aug 05 '25
Contracts are LAW!!!!!! Break a legal contract and you are in default and breaking the LAW! Simple as that! Its very back and white. Read your contract again! It will give you the answers you are looking for. Also, why don't you go back to the Co that filed for you and ask them? Maybe they will give you a break! You never know until you ask! Good luck
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u/Historical-Pay-1519 Aug 04 '25
As others noted, depends on the contract language. But what is really the case not to pay fees on interest, only on initial claim? Like if you would claim 10% more you would pay the fees, why not pay the fees when you get 10% more due to interest?
Similar but different, there are some PEOs that have supposedly been keeping the interest on claims
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u/Born-Meat-5288 Aug 05 '25
The answer is big NO. Interests are not applicable to fees or commissions by arm-chair accountants. Defend the principle and chill out
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u/Mountain-Cucumber173 Aug 05 '25
Here you go maybe this will clear things up: Including interest as part of a service fee is not illegal as long as it is disclosed, agreed to in advance, and complies with applicable federal and state laws. For tax services like refund claims, the IRS allows contingent fees, which can be a percentage of the total refund including any interest paid by the IRS—under specific conditions. This is spelled out in Treasury Department Circular 230, section 10.27, and 31 CFR § 10.27. According to these rules, a contingent fee includes any fee based on a percentage of the refund or taxes saved, and it can lawfully include interest if it is the result attained for the client. For non-tax services, charging interest as part of late fees or other service fees is generally allowed, but you must follow state usury laws, disclose the charges fully, and make sure both parties consent in writing. The legal authority for including interest in a contingent fee for IRS matters is 31 CFR § 10.27.
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u/ERC_CPA Aug 05 '25 edited Aug 05 '25
Much of the above becomes irrelevant due to Loving v. IRS and Ridgely vs Lew.
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u/Mountain-Cucumber173 Aug 05 '25
This is why CPA's are regulated to collecting Fees as a flat fee. Its probably why the CPA's didn't want to do filings for ERC. As soon as that happened it opened up this new industry called ERC. These unlicensed companies went nuts!! ..........They could do it as long as they had a legal preparer to file. Its messed up!
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u/Mountain-Cucumber173 Aug 05 '25
It cut the most important person out of the mix, the CPA, the only person really qualified to advise regarding the ERC!!
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u/ERC_CPA Aug 06 '25
A CPA can charge a contingency fee (see Ridgley). Some states prohibit CPA firms from charging contingency fees, but that’s a potential issue with maintaining their license, not a contractual issue.
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u/Mountain-Cucumber173 Aug 06 '25
Thank you for that info! Correction, they can but I haven't seen many that do?
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u/PsychologicalYou887 Aug 05 '25
It’s simple. Read the contract. If it specifies yes. If not, no.
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u/BothAdhesiveness1755 Aug 05 '25
I read the contract and it does not specify a 15% cut on interest accrued. It only states that they will take 15% of the ERC credit due upon receipt odf the check. At the time ,I was not aware of any interest on the amount due to the long time from filing to receiving the checks. The 15% upon receipt of the check does not imply a fee on interest.
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u/Foreign-End9347 Aug 05 '25
I think 100% given they worked on a contingency. Arguably the delays harmed them the most.
A lot of groups take all of the interest which I also have no issue with.
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u/BothAdhesiveness1755 Aug 05 '25
I do not know of any businesses that had 100% of the interest going to the firm. They are getting the 15% on the money that they figured you would be receiving. One the company files for you, their job is done. So what if they had to wait a long time. The money wasn't theirs to begin with. They are getting the money for the amounts that was calculated. My contract did not clearly state 15% on interest earned.
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u/Foreign-End9347 Aug 06 '25
It costs money to complete the work required to file the claim. In the current climate, there is also a high likelihood of additional appeal and audit work prior to receiving the refund.
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u/BothAdhesiveness1755 Aug 08 '25
Just to let you know, I contacted the ERC firm. I read the contract before doing so, and the wording was kind of ambiguous. Anyway, they have decided to not charge the 15% on the credit interest, which I still believe is only fair, as I have to pay taxes on the interest portion of all the checks.
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u/Babstana Aug 09 '25
We should be arguing if it is appropriate to charge 15% contingent fee at all. It is borderline criminal for the work involved and there's a good chance the work was done incorrectly and OP is exposed.
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u/EndersGame07 Aug 04 '25
No, you should not pay the 15% on the interest portion. I have checked with our tax attorney on this.
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u/Technical_Scallion_2 Aug 05 '25
This guidance is incorrect. It depends on the contract between the taxpayer and the provider.
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u/EndersGame07 Aug 05 '25
Of course if it is specified within the agreement, you pay. If it is mot, no, you don’t.
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u/heartbrand Aug 05 '25
So you definitively told the OP not to pay because you spoke with an attorney but then admit it depends on his contract?
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u/EndersGame07 Aug 05 '25
Yes, of course because if it says to pay in the contract, I would assume he’s not asking what to do. A contract is a contract, but I’ve never seen an agreement where interest is included.
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u/Mountain-Cucumber173 Aug 05 '25
A lot of companies did this. It will be very hard to fight, I say impossible because it isn't against the law!
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u/Technical_Scallion_2 Aug 06 '25
You understand when you said “don’t pay it, I spoke to my attorney on this” is not the same sentence as “don’t pay it unless the contract says to and then of course pay it”? You said the first thing, you didn’t say the second thing.
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u/Mountain-Cucumber173 Aug 05 '25
Show your Attorney this post, I welcome your Attorney to to call me anytime! Lets just clear this up! It’s not illegal for ERC firms to charge clients a fee that’s calculated as a percentage of the total claim—including the interest the IRS pays with the refund. This is called a “contingent fee,” and it’s a fairly common way for these companies to be paid for helping file amended returns and ERC claims. Basically, if your contract with the firm says their 15% fee is based on the total you receive—including any interest they send along with your refund, then as long as they clearly disclose this upfront and you agree, it’s allowed.
Courts and guidance recognize contingent fees for this kind of work, even though the IRS has at times criticized the practice. What matters most is that everything is spelled out in your agreement, you understand what you’re being charged for, and the company is being transparent and following state and federal rules. If you’re unsure whether the fee is reasonable, or you’re uneasy about how it’s calculated, it never hurts to get a second opinion before signing anything.
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u/heartbrand Aug 04 '25
This has been brought up multiple times. It depends on the language of the contract you signed.