ERC Employee Retention Credit Expenses paid to consultants and timing of deduction

[swiztaxpro]

Can the ERC credit be reduced by the expense paid to consulting firm for calculating and determining the credit.  Credit is income via reduced wages in year wages paid, but cost a lot of money to receive, can this expense be used to lower the credit for that year, 2020 and 2021? Or does it have to be expensed in the year paid/accrued?  Thanks, i can't find any guidance on this. If you have a reply please provide the section/code info thanks.

Jim

[sjrcpa]

Professional fees are deducted in the year paid, for cash basis taxpayers.

There is no special rule for those relating to ERC so no cite.

[qbteachmt]

"should be used as an expense to receive income in that year as well"

I wrote this answer for your original topic.

The credit that was available at the time would have been against qualifying wages, and if that was handled timely to the provision, it would have reduced wages and saved sending in funds that did not need to be sent, or to get that amount (in essence an expense rebate) refunded for each qualifying wage in each qualifying period. That means there is no need to further offset "income" with an expense (the consultant), because it isn't income back then. It became a receivable when realized. It is accounted for in the period it is a qualified provision (amending the filings), and it is receivable (not income but a reduction of expense) and the expense to apply for it is a current expense.

I think that is what you are trying to relate.

It will offset the ordinary operating income for the year this service was provided to that employer.

This wasn't an audited error discovery, right?