19 December 2023

IRS Warns Businesses: Watch Out for Fraudulent ERC Claims!

By Ronald Smith

Hey there, business owners and tax-exempt organizations! I’ve got some important news for you straight from the Internal Revenue Service (IRS). They want to make sure you’re aware of something big – there are people out there trying to trick you with misleading and fraudulent claims about the Employee Retention Credit (ERC). It’s time to be on high alert!

Now, you might be wondering, what exactly is this Employee Retention Credit? Well, it’s a genuine tax credit that many businesses have rightfully applied for during this pandemic. It’s also known as the Employee Retention Tax Credit or ERTC. It’s meant to help businesses keep their employees on payroll and survive these tough times.

But here’s the problem: the IRS has noticed a troubling trend. There’s been a surge in aggressive promoters who are spreading false information about this credit. These folks are out there exaggerating what the credit can do and misleading you about who qualifies for it.

As a result, the IRS has had enough. They’re cracking down on these deceptive claims. They’re increasing their audits and criminal investigations to catch those who are trying to take advantage of this situation. They want to protect honest businesses, like yours, from falling into these traps.

As the IRS Commissioner, I want to make sure you understand the dangers of false promotions like these. Aggressive promoters make false promises about the tax credit, tricking people into giving them money. This puts you at risk of having your claim denied or having to pay back the credit.

In order to deal with this problem, we at the IRS have hired more people to help process claims for the tax credit. These claims often require us to go through amended tax returns, which takes a lot of time. Despite the increase in false claims because of these shady marketing tactics, we are committed to processing valid claims as quickly as we can while also protecting against fraud.

If you’re thinking about applying for this credit, it’s really important that you take the time to read and understand all the requirements for this limited program. The IRS has been warning people about scams involving this credit and it’s even on their list of the top tax scams to watch out for.

Making a false claim for the credit can have serious consequences. You may end up having to pay back the credit, along with penalties and interest. This could actually leave your business or organization in a worse financial position than if you had never claimed the credit at all.

I want to give you a heads-up about some sneaky marketing tactics that the IRS wants us to be aware of when it comes to the ERC. They’ve put together a list of warning signs for businesses like ours to watch out for.

First off, be on guard against unsolicited calls or advertisements that promise an easy application process. These can be a red flag. And if someone claims they can determine our eligibility for the ERC within minutes, we should be skeptical. It takes time and careful consideration to determine if we qualify.

Another thing to watch out for is large upfront fees. The IRS says we should be cautious if someone asks for a big payment to help us claim the credit. And if we come across anyone who wants a percentage of the refund amount we get from the ERC, that’s a sign to be wary of too.

Here’s another thing to keep in mind: if someone says we qualify for the ERC without having a thorough discussion about our tax situation, it might be a trick. And be careful if someone pushes us to submit a claim without explaining the potential risks involved. We don’t want to fall for any scams!

The IRS also wants us to be aware of promoters who leave out important details. For example, they might not tell us that only recovery startup businesses are eligible for the ERC in the fourth quarter of 2021. It’s crucial to have all the facts before making any decisions.

So, all in all, the IRS is urging us to stay sharp and not fall for these misleading marketing tactics or scams. We need to make sure we understand the rules and requirements of the ERC thoroughly before applying. That way, we can claim any credits we’re eligible for without putting our business at risk.