Name: The Tax Break That Launched a Marketing Army
Uploaded: 2023-09-04T09:30:00Z
Duration: 8 min 38 s
Description: A modern day “gold rush” is under way to take advantage of an obscure pandemic-era tax rebate. One of the biggest players in this field is Bottom Line Concepts, a consulting firm that could receive more than $1 billion in fees. Photo Illustration: Alexander Hotz/WSJ

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A modern day “gold rush” is under way to take advantage of an obscure pandemic-era tax rebate. One of the biggest players in this field is Bottom Line Concepts, a consulting firm that could receive more than $1 billion in fees. Photo Illustration: Alexander Hotz/WSJ

https://m.wsj.net/video/20230901/3aa902c0-5e7e-42b1-b862-d72850518b08/1/hls/manifest-hd-wifi.m3u8

The Tax Break That Launched a Marketing Army

There's millions of dollars inside these envelopes.

Narrator: Meet Josh Fox.

If you wanna change your life, this is the conversation for you. You can make $6.3 million. We love money.

Narrator: In the past few years, Fox has built an empire, recently with some assistance from "Shark Tank" investor Kevin O'Leary by taking advantage of an obscure pandemic era tax break.

The Employee Retention Credit Program. Do you even know what that is?

This is the modern-day gold rush. That's what I'm calling it.

Oh, this is a total gold rush.

Narrator: Since 2021, Fox's firm, Bottom Line Concepts, has worked with thousands of small businesses and nonprofits in an effort to pursue more than $6 billion in tax breaks, which could yield Bottom Line more than $1 billion in fees.

We're rich.

Narrator: But is this gold rush too good to be true?

One of the things we've seen with these pandemic programs is when you do things in a hurry, you have unintended consequences.

Narrator: In March of 2020, as the coronavirus pandemic first gripped the country, President Trump signed the $2 trillion CARES Act.

I've never signed anything with a T on it.

Narrator: The largest economic stimulus package in US history. One of the lesser known parts of that legislation was the employee retention tax credit or ERC.

There was real concern during the pandemic that people would get laid off and lose some of that attachment to a particular employer and it'd be harder to turn the economy back on again. The real core point of this credit was to keep workers attached to their jobs.

Narrator: To qualify for the ERC, a business or nonprofit must meet certain criteria.

To get in, you have to meet one of two tests, either your revenue had to drop by a specific amount. The other way is you had to have a government order that was fully or partially suspending your business.

Narrator: The amount of a business can qualify for depends on its number of employees and which quarters the business was affected during the pandemic.

The number you'll see really frequently in all the ads is 26,000 per employee.

See if your company qualifies for up to $26,000 per employee.

And I think that's basically 5,000 per employee in 2020, which was the limit, and then 7,000 for each of the first three quarters in 2021, which was the limit for that year. So you'll see this 26,000 per employee number. That's the maximum you could qualify for if you were eligible for all of those quarters.

Narrator: Determining if a business qualifies for the ERC and for how much isn't straightforward. It's also a challenge for the IRS.

The employee retention credit is an extremely complicated filing to process.

Narrator: That's where firms like Bottom Line Concepts come in.

So I've got the expert with me. This is Josh Fox.

Narrator: Although the ERC expired in late 2021, the window to claim the credit retroactively remains open until early 2025.

I want you to get this money. You'd be crazy not to get this.

Narrator: To find eligible businesses, firms like Bottom Line are advertising heavily.

"What's the ERC?" you ask.

Narrator: Shark Tank veteran Kevin O'Leary is Bottom Line's best known partner.

What is this?

This is hundreds of millions of dollars, literally, Kevin.

Narrator: O'Leary told The Wall Street Journal why he joined Forces with Bottom Line.

I said, "Look, I need to buy a piece of the company. I need to be a shareholder." But in this case, it made no sense 'cause this program's going away in a matter of months. So I said, "Let's form a new entity. Let's be partners in it. We're gonna call it WonderTrust."

Narrator: WonderTrust is a website that connects potential businesses with Bottom Line.

I will get behind this. I'll go all over network television, all over social and tell people about this program 'cause I'm a believer in it and I'll put my own companies through it. So I'll eat my own cooking. Mr. Wonderful here, and there's no debate about this.

Narrator: WonderTrust said it has submitted about $140 million in ERC claims for more than 780 employers.

I'm pounding the table. I'm telling... Most small businesses know who I am and I'm telling them this is mandate number one. You have months left to look into this and you should.

Narrator: For the businesses that are unconvinced or unreceptive to commercials, Bottom Line has also created a referral network of about 50,000 people.

These are people who are not on salary at Bottom Line. They may have another job. They may be semi-retired, they may be fully retired and they're just out there talking to every employer they can find.

What else are the people on this call doing? There's 600 people today on the call that you can make $6.3 million.

Narrator: One of the tools Bottom Line has used to recruit potential affiliates is online video.

One of the videos is called "Become a Millionaire with Bottom Line."

So 100 clients divided by 24 months, you have to bring us four clients a month.

They run through the math, "Bring me these number of people and look how much money you can make."

So one client a week for two years, you make 1,300,000.

We're making millionaires. This is easy money. It's a way to get rich.

Carrie Hagen-Smith is a Bottom Line Concepts referral partner. Hagen-Smith is working with 24 clients that she expects will receive about $1.4 million back from the IRS.

They have not all gotten their paperwork in yet, so it's a very long process, both on the client side and on Bottom Line Concept side. And then we add the third element, which is the IRS processing.

Narrator: Hagen-Smith said her success has come primarily from face-to-face interactions.

My biggest strategy has been with a partner and we go bold calling. That's not wimping out and cold calling on the phone. That's walking boldfaced into the business's door and actually being the local face that they can rely on for ERC Answers.

Narrator: Bottom Line doesn't require its customers to shell out cash. Instead, everyone gets paid once the IRS issues a check.

You don't have to buy anything. You don't have to spend a lot of money upfront. You don't have to convince your clients to write you a check. You get money at the end once everyone is happy and you're helping small businesses along the way. That's the pitch.

Everything we do, we're doing because you've signed a contract and you're going to get the actual check back from the IRS. That's it. That alleviates a lot of those fears that people have from hearing the scam alerts.

I actually started digging into it and looked at people that could process these applications. I came to the conclusion, there's a lot of, well, for lack of a better word, schlockers out there.

Narrator: Despite his support for the ERC, O'Leary acknowledges that there are some unscrupulous firms involved in the ERC space.

I think anybody that takes a payment upfront, I would not use them because why are they doing that?

Narrator: Every year as the nation heads into tax season, the IRS releases a list of the most common tax scams for taxpayers to be mindful of. At the top of that list for 2023 was fraudulent ERC claims.

For the IRS, the ERC is a giant headache. On the one hand, what's happened is because they've gotten so many applications, there've been a lot of complaints that they haven't processed these refunds quickly enough. And I've talked to small businesses who need the money who really feel they qualify and they haven't and they've been waiting. On the other hand, the IRS is really worried about fraud.

Figuring out whether what's legal here and what's not is is really tricky. I think we're very much in the early stages of that. You know, the IRS has certainly indicated that it thinks it is seeing, and the IRS does not name particular firms in this, but they've indicated that they're seeing what they think are a significant number of fraudulent or overstated or ineligible claims.

Narrator: In a statement to The Wall Street Journal, Bottom Line wrote, "We are proud of the company's record of delivering valuable services to American businesses with no upfront fees in a compliant and transparent manner, including educating small businesses on the ERC program and helping them reinvest in their business and their workforce to the benefit of local communities across the country.

Look at all these checks I am actually holding in my hand.

How an Obscure Tax Break Became a ‘Gold Rush’

News moves fast, and there's not always time to untangle the complex forces driving the day's biggest stories. WSJ Explains breaks down big market moves, business and economic trends, and scientific developments to help you stay ahead of the curve.

How an Obscure Tax Break Became a ‘Gold Rush’

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