Penalties Associated with Incorrect ERTC Claims

August 21, 2023
Dayes Law Firm

The last thing any business owner wants to contend with is an IRS audit. With so many businesses turning in Employee Retention Tax Credit claims, the agency has announced it is “increasing scrutiny on dubious submissions” and dealing with potential fraud in the program. 

There are a number of penalties associated with incorrect Employee Retention Tax Credit claims, and you don’t want to accidentally make a mistake with your claim that could seriously cost you and your business in the end. 

Incorrect ERTC Claim Potential Penalties

In late July, IRS Commissioner Danny Werfel said the agency is now able to shift away from clearing the backlog of valid Employee Retention Tax Credit (ERTC/ERC) claims and be more aggressive about “increased audit and criminal investigation work on these claims.” For those who turned in incorrect ERTC claims, even unknowingly, there could be serious consequences. 

“We will work with the Treasury to explore legislative solutions we can share with Congress to help address fraud and error,” Werfel said at a special roundtable session of tax professionals in Atlanta.

The IRS warned in a press release that anyone who improperly claims the ERTC will have to pay it back, “possibly with penalties and interest.”

The obvious danger associated with incorrect Employee Retention Tax Credit claims is the possibility of an audit. Any sort of audit can be a huge headache for businesses, and one that could result in the loss of ERTC funds should certainly be avoided at all costs. 

If an employer is audited and the amount of the ERTC is reduced, penalties could vary 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 warned. 

Employee Retention Tax Credit refunds can result in businesses receiving thousands of dollars. If claimed incorrectly, adding on penalties and interest could financially ruin a business, even if the business wasn’t trying to defraud the IRS. 

ERTC Claim Assistance 

One way to avoid the potential penalties associated with ERTC claims is by bringing on a team of tax professionals to help you file your claim in the first place. 

Not only do these specialists know how to best increase your refund when claiming the ERTC, but they can also make sure every piece of information you send to the IRS is as accurate as possible, so you avoid any red flags or miscommunication. ERTC teams can verify your refund amount and use their resources and team to handle the entire process – leaving you able to focus on your business instead. 

And if there are any ERTC application-related complications such as audits, an ERTC team like the one at Dayes Law Firm can assist with audit defense, too. 

The Dayes team and our partner firms have helped businesses file for millions in refunds through the Employee Retention Tax Credit program already, and we are confident we can help you turn in an accurate claim for your business as well. Please contact us without delay to see how we can assist you by calling 602-888-2900 or by filling out the form on this page to message our specialists. 

We look forward to hearing from you and to proving how we can best support you with your Employee Tax Credit claim today!