In 2020, the federal government introduced the CARES Act to give businesses and residents financial help during the pandemic. The stimulus bill included the Employee Retention Tax Credit (ERTC) — also known as the Employee Retention Credit (ERC) — to help employers keep their staff members despite COVID-related financial challenges.
Many businesses jumped at the chance, but unfortunately, so did scammers. Tempting honest employers with a wave of ERTC aggressive promotions, these exploitative promoters misled companies into filing ineligible or fraudulent applications.
The ERTC team at Dayes Law Firm has compiled a list of red flags to help you avoid unethical marketers. If you suspect you’ve already fallen victim, we recommend that you contact a trusted tax professional or qualified attorney right away. The ERTC has complex eligibility requirements, and haveing professional help on your side can help the process go smoothly. Experienced ERC refund lawyers can answer your specific questions and provide legal guidance on your current tax situation.
What Happens if I Fall for an ERTC Scheme?
In an attempt to gain your trust, ERTC scammers may assure you that you have nothing to lose by applying for the credit. However, this is not true — you do, in fact, have something to lose.
If you received a tax refund through the ERTC erroneously, you may have to pay back the credit, plus interest and penalties on top of that amount. This could end up costing your business more money than if you hadn’t claimed the credit in the first place.
Furthermore, some companies that file fraudulent ERTC applications may even face criminal investigations.
That’s why you need to know the warning signs of ERTC aggressive promotions and scams. If you do decide to file a claim, don’t sign off on it until a knowledgeable attorney or tax professional reviews your financial records to ensure that you meet the eligibility criteria.
What Warning Signs Should I Look For?
Over two years after the ERTC kicked off, the IRS is still warning taxpayers to protect themselves against fraudulent schemes.
Unauthorized third-party marketers reach victims by advertising on TV, radio, and social media. They may even contact you directly by texting you, calling you, or sending you letters in the mail that appear to come from your financial institution or a government agency.
IRS guidance suggests that business owners stay on guard for the following red flags:
- Unsolicited correspondence or advertisements that mention an “easy application process”
- Suggestions that the promoter can determine your ERTC eligibility in minutes
- Broad statements indicating that your company qualifies for the credit before you have presented the facts of your situation
- Charging sizable fees upfront or based on a percentage of the ERTC refund amount received
- Tax preparers refusing to sign your claim or include their identifying information
- Leaving out key details, like how to determine eligibility, how to calculate the proper tax refund amount, and how to know for which quarters and years your business qualifies to claim the credit.
How Is the IRS Addressing ERTC Scams?
After noticing a massive uptick in ERTC aggressive promotions and scams, in 2023 the IRS temporarily halted the processing of new claims. It also began a stricter review procedure, which has lengthened processing times for existing claims from 90 days to 180 days. Finally, the agency has started allowing companies that filed potentially inaccurate ERTC claims to withdraw their applications with no repercussions.
Claiming your ERTC requires intricate financial calculations and knowledge of complex (and ever-changing) tax laws. Whether you need to withdraw your ERTC application or have questions about filing a claim, Dayes Law Firm can help. Call us today at 800-503-2000 for a free consultation.