How Should Businesses Report ERTC Fraud?

December 11, 2023
Dayes Law Firm

Although many businesses are eligible to apply for the Employee Retention Tax Credit (ERTC/ERC), some are not, and third-party promoters continue to misrepresent who can qualify for the credits. Plus, some dishonest business owners may already know they aren’t actually eligible to apply for the ERTC, but are choosing to do so anyway. If you suspect ERTC fraud from promoters or other business owners, there are steps you can take to report it to the IRS and other authorities, including a national hotline just for these situations.

How to Report ERTC Fraud to the IRS and Other Authorities

In July, IRS Commissioner Danny Werfel said the IRS was shifting away from clearing the backlog of valid ERTC claims. The IRS then started to focus on “increased audit and criminal investigation work on these claims” with heightened scrutiny.

And in September, the agency announced “an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program” due to increased fraud concerns. IRS Commissioner Werfel noted in the announcement, “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in.” 

Sadly, the IRS has already had to open hundreds of criminal cases into “dubious claims” for the Employee Retention Tax Credit program, and thousands of claims have already been referred for audit

To assist business owners who filed an ERTC claim and are now worried about its legitimacy, on October 19, the IRS announced the details of a withdrawal process. But there are unfortunately employers and third-party promoters out there who are probably aware the claims they worked on are not eligible. If you think you’ve encountered such a case, there are ways to report ERTC fraud to the IRS and other authorities. 

According to the IRS, if you suspect ERTC abuse and want to report it, you can submit Form 14242, Report Suspected Abusive Tax Promotions or Preparers. It can be mailed or faxed alongside any supporting materials to the IRS Lead Development Center in the Office of Promoter Investigations.

You could also use Form 3949-A (Information Referral) to report alleged tax violations by an individual or business, or Form 14157 (Return Preparer Complaint) “to report complaints including those associated with employment taxes as well as preparer misconduct and false documents,” Thomson Reuters reported.

Additionally, individuals with information about allegations of attempted fraud involving COVID-19 can report it by contacting the Justice Department’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or through the NCDF Web Complaint Form at www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form. In August, the Justice Department announced “the results of a coordinated, nationwide enforcement action to combat COVID-19 fraud,” and some of the matters involved in the enforcement action included “fraud committed against the IRS Employee Retention Credit program (ERC).”

Working With Dayes Law Firm on the ERTC

If you’re fairly certain your business qualifies to claim the ERTC, but you want to be sure every piece of your application is accurate to avoid IRS scrutiny, you might want to consider working with a tax professional to complete your application. The ERTC team at Dayes Law Firm can help. 

Our firm and the partners we work with have assisted businesses in filing for over $250 million in tax credit claims and our clients have already received over $25 million in funds for ERTC refunds. We know all of the documentation the IRS will be looking for and can help make sure your application is as strong as it can possibly be.
We offer a free, no-obligation consultation to discuss the unique needs of your business at your earliest convenience. Please contact us by calling our firm at (800) 503-2000 to learn more today!