On September 14, 2023 the IRS announced a moratorium through at least the end of the year on processing new claims for the Employee Retention Tax Credit (ERTC/ERC). The agency made the drastic move because of “growing evidence of questionable claims pouring in.” That begs the question – what sort of penalties could businesses face for making false, “questionable,” or misleading ERTC claims?

Employee Retention Tax Credit: False Claim Penalties Businesses May Face

In late July, IRS Commissioner Danny Werfel said the IRS was shifting away from clearing the backlog of valid ERTC claims and being more aggressive about “increased audit and criminal investigation work on these claims.” The September announcement noted that the agency is now working on “hundreds of criminal cases” and that thousands of Employee Retention Tax Credit claims have been referred for audit.

The IRS warned in a press release that business owners who improperly claim the ERTC will have to pay it back, “possibly with penalties and interest.” Even if you think your ERTC claim is legitimate, if you’ve been misled by an unscrupulous third-party promoter, you could be left holding the bag and potentially end up in a worse financial position. 

“Businesses should seek out a trusted tax professional who actually understands the complex ERC rules,” Werfel said. 

The tax professionals at Dayes Law Firm can work with you to be sure you actually qualify to apply for the ERTC and assist you with every step of the process. We can help you avoid false claim penalties which can include everything from a 20 percent “accuracy-related penalty” to a 75 percent penalty if the IRS claims civil fraud by the employer, Bloomberg Tax reported.

“In an egregious case, the IRS could assert criminal fraud, resulting in penalties and potential imprisonment,” the outlet reported. 

The credit maximum for the Employee Retention Tax Credit per employee is $7,000 for each employee per quarter in 2021 – equaling $21,000 in total – according to the IRS. There is also a maximum credit of $5,000 per employee in 2020. In total, a business owner could potentially claim up to $26,000 per employee. 

Now, imagine if that claim is deemed false by the IRS. A business could have to pay that money back alongside penalties and interest, at the very least, or deal with a criminal investigation in a worst-case scenario. 

Tax Professionals and the ERTC

A team of tax professionals can help you file your ERTC claim in the first place to avoid any potential future issues with the IRS. An ERTC team like the one at Dayes Law Firm can help you gather all of the necessary documentation to claim the credit and verify all of the information for accuracy and eligibility. 

Plus, if you do unfortunately end up dealing with an IRS ERTC audit, Dayes Law Firm can assist with audit defense, too. Our firm will back up our Employee Retention Tax Credit work and stand behind refunds we believe are due to your business –even if that means defending your business against an ERC audit or if there is ever a request for an audit in the future.

Contact us for a no-obligation, free consultation today to see how the specially trained ERTC lawyers and other legal professionals at Dayes Law Firm can help you and your business. Call (800) 503-2000 to learn more!