ERC money paid to me in 2024 by way of check from IRS on a business I closed in 2022; how do I report the interest portion on my taxes?

[NancyWolfe]

This is the back story so you can understand why I am asking the questions I am!

Due to COVID 2019, I closed three businesses on the following dates: February 21, 2021, December 24, 2021, and December 15, 2022.  I was approached in June of 2023 by ERC Specialists who said that I could receive money back for the Employee Retention Credit if I qualified and they would handle all the paperwork with the IRS - Form 941X for a fee due upon receiving the money.

I agreed and they filed F941x's for 2 qtrs of 2020 for business 1, 6 qtrs between 2020 and 2021 on behalf of business 2, and 2 qtrs in 2021 for business 3. Then the IRS put all pay-outs on hold to investigate for fraudulent claims. 

In 2024, I started to receive checks from the IRS for the amount of the credit applied for plus interest. In total, I have received payments for 6 of the 10 quarters filed for.  The checks were made out to the name of the business and as a single member LLC, I cashed each of them, paid my fee to the company as agreed and now I am in a quandary.

I received 3 1099-INTs from the IRS that stated this:  if I have to file a return, this interest must be recorded as income.  All three forms came addressed to the business (which has been closed) and each one listed the proper EIN associated with the business named. 

1. Where would I put this money received on my tax return?

2. Do I need to use a Schedule C to report it as income for each business?

3. Is that where I would list the amount I paid to the ERC Specialist company to file on my behalf?

Next, what else would I need to do to report this on my 2024 tax return? I will have the other 4 payments (3 of which I already received in 2025) to deal with next year. 

I file my own taxes, but I can't find any information out there for my situation. PLEASE HELP!!!

[Vanessa A]

If there is no business, you cannot report it on the Schedule C.

Since you cashed the checks this would be your income reported by you on your personal return.  You cannot claim a deduction for the payment to the ERC Specialist company.  The ERC is not taxable income so you will not enter that on your return.  You will just enter the interest received on the 1099-INT. 

[NancyWolfe]

@Vanessa A 

Thank you for responding to me!

I had it that way originally, but when I saw that the IRS made the checks payable to the business and used the business EIN on the 1099-INT, that made me think I needed to use their Schedule C to report the interest and then also, I deducted the fee paid to the specialist company that prepared the 941X.  but I guess not... I just eat that cost and cannot reduce the taxable interest income by what I paid them for their work?

.

Yes, the businesses are closed and no returns have been filed after the second year closed - misc expenses and payments that happened in January (cash basis)  -  two of the LLCs have not been closed, but the third one, yes.

Thanks again.