How to Be Sure Your ERC Filing is Free of Fraudulent Claims

August 15, 2023
Dayes Law Firm

The Employee Retention Credit (ERC) could help your business recover from pandemic-related financial losses, but you shouldn’t approach this credit casually. Like any tax credit, you must file correctly to avoid IRS penalties. And unfortunately, the ERC has been the target of scams from disreputable tax preparation companies since it first passed in 2020. 

Before you claim this tax credit, review these tips to avoid falling prey to ERC fraud. 

Confirm Your Business ERC Eligibility

Not every business is eligible for the ERC. You’ll want to ensure that your company meets the eligibility requirements before filing. 

In general, your business may be eligible if you experienced either a significant decline in gross receipts in 2020 or 2021 due to government shutdowns related to the pandemic.

  • To be eligible under the Original CARES Act of 2020, your gross receipts for at least one quarter in 2020 must have decreased by 50% or more relative to the same quarter in 2019; OR your business activities must have been interrupted due to a government order. 
  • To qualify under the COVID Relief Bill of 2021, your gross receipts for at least one quarter in 2021 must have been less than 80% of the gross receipts for the same quarter in 2019. 

If you don’t meet either of these criteria, claiming the ERC could result in an IRS penalty. Consult a tax attorney if you’re unsure of your eligibility. 

Know the Warning Signs of ERC Scams

ERC fraud scams are running rampant across the internet. To avoid fraudulent claims, understand a few red flags of ERC scams. An organization offering to help you with an ERC claim should never:

  • Pledge free cash without looking at your gross receipts
  • Ask someone else to amend your tax returns for you (because they don’t want their signature on your IRS tax return)
  • Use questionable communications to talk to you about the ERC, such as cold calls or mistake-ridden emails
  • Pressure or threaten you to sign documents you don’t fully understand

In general, avoid organizations that reach out to you about the ERC. Instead, do your due diligence to find a qualified tax attorney or CPA to assist you.

Don’t Believe Everything You Read on the Internet

Some false information about the ERC has been circulating on social media platforms. Have you recently seen someone posting about the ERC on your Facebook feed, providing tips to qualify as a recovery startup business or falsely prove your eligibility for the ERC? Take everything you read with a grain of salt. 

Even if the information came directly from a Facebook friend, they may have taken it from a scam post on the platform, or they may just be ill-informed. It’s wise to collect your information about the ERC directly from reputable sources, such as the IRS website or a trusted tax professional. 

Consult a Reliable Tax Attorney

False claims on your taxes can result in a 20% penalty from the IRS or even lead to tax evasion charges. If you want to ensure that your business claims the ERC correctly, work with a tax professional who can double-check your calculations and correct any errors. Reliable tax attorneys or CPAs: 

  • Communicate with you in person or over video chat, not just email
  • Provide you with actual proof of your ERC eligibility and explain how they calculated your qualified wages
  • Have been around for many years; they didn’t just pop up when the ERC was passed

At Dayes Law Firm, our IRS tax collection attorneys and ERC refund recovery lawyers have the experience and credentials to help you claim your ERC correctly. For assistance avoiding ERC fraud, call us at (800) 503-2000.