How ERTC Scams Target Businesses and Individuals

December 18, 2023
Dayes Law Firm

Your phone rings, and it’s some company claiming it can “score you thousands of dollars with an easy application process.” It sounds like nonsense, but the caller swears it’s legit. You can’t say you’re not at least a bit intrigued.

The Employee Retention Tax Credit (ERTC) is indeed a real tax credit, but not every business qualifies. Still, ERTC scammers try to claim the credit for you whether or not your company is eligible. Here’s how ERTC scams are targeting business owners.

Fake Phone Calls and Letters

Legitimate tax attorneys and accountants will not commonly call you with unsolicited financial advice. ERTC processing mills, on the other hand, rely on this tactic to trick unsuspecting business owners into claiming the credit.

If someone calls and says you qualify for the ERTC without looking at your tax situation, treat it as a red flag. The caller is likely a scammer who wants to take a hefty cut of your credit. If you don’t qualify and the IRS finds out, you’ll have to pay back that money. Meanwhile, the scammer rides off into the sunset with their ill-gotten cash.

Identity Theft Scams

This is among the nastiest of ERTC scams. A fraudster will steal your business’s details, such as your Employer Identification Number (EIN), and use them to submit a claim on your behalf. However, instead of sending the money to you, they redirect it to themselves.

The IRS calls for their money back a few weeks or months later. You, of course, are understandably confused.

Lying About Employees

The IRS only allows employers to claim the credit for qualified wages paid to eligible employees. ERTC scammers may invent fake employees to boost your credit, then take advantage by skimming some of your refund for themselves.

If you choose to work with an ERTC processor, review the claim form before submitting it to catch mistakes (or outright lies) regarding your employee numbers.

Exaggerating Wages

This is another way scammers try to take a bigger portion of your refund. They might inflate wages paid by including non-wages, such as holiday bonuses and gifts, as compensation.

How to Avoid ERTC Scams

It’s fairly easy to avoid ERTC scams if you know what to look for. Follow these tips:

  • Understand whether you truly qualify for the credit. You only qualify if you had a large drop in gross receipts, experienced a full or partial suspension of operations, or meet the requirements of a recovery startup business.
  • Ask the ERTC processor for their tax credentials if you work with one. If they refuse, move on.
  • Does the preparer avoid your phone calls and emails? If you can never seem to reach them, that’s a bad sign.
  • Ask whether the company offers defense against IRS audits. You’re putting your neck on the line by allowing the preparer to make a claim for you, so they should be willing to defend you if there’s a problem.
  • Ask the company how payment works. Legit tax professionals charge clients according to specific tax preparation schedules. Scammers typically take a percentage of your refund instead.
  • Watch out for warning phrases such as “fast refund” and promises you’ll have the credit in days. It usually takes the IRS six to eight weeks, and sometimes longer, to process claims.

Work With a Trusted Tax Pro to Claim Your Credit

ERTC scams aren’t just annoying; they can also spell serious financial trouble for eligible employers. If you could use help claiming the credit but don’t want to fall prey to a scam, call Dayes Law Firm at (800) 503-2000. We’ll review your tax situation with you to ensure you qualify. Contact us today to learn more!