What Are the Potential Risks of Incorrectly Claiming the ERTC?

October 17, 2023
Dayes Law Firm

In mid-September, the IRS ordered a “moratorium on processing of new claims through year’s end” when it comes to the Employee Retention Tax Credit, also known as the ERTC or ERC. The move came amid concerns of “improper” or “ineligible” claims being sent to the agency and worries of potential fraud in the program. 

If you’re a business owner who hasn’t yet claimed the credit, you might be wondering what the risks are of incorrectly claiming the ERTC.

Risks and Penalties of Incorrectly Claiming the ERTC

On September 14, the IRS announced “an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program” as a result of increased fraud concerns. 

IRS Commissioner Danny 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,” and urged that when it comes to claiming the credit, “businesses should seek out a trusted tax professional who actually understands the complex ERC rules.”

If you work with a tax professional on your Employee Retention Tax Credit application, you’ll have the knowledge and resources of a team who thoroughly understands the ERTC and tax code on your side and will be less likely to turn in an incorrect claim to the credit. The tax professionals at Dayes Law Firm, for instance, can help you with your application from start to finish – and even assist with an IRS audit defense if your claim somehow gets swept up in the push for increased scrutiny. 

But what are the potential risks of incorrectly claiming the Employee Retention Tax Credit? In the past, the IRS has warned that the agency is becoming “more aggressive” about “increased audit and criminal investigation work on these claims.”

That work may result in anyone who improperly claims the ERTC having to pay it back “possibly with penalties and interest.” If a business owner 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. 

ERTC Claim Assistance from Dayes Law Firm 

At Dayes Law Firm, we understand the last thing you want to deal with as an employer is any sort of tax complication like an audit. In an attempt to avoid this possibility, you might want to consider bringing on a team of tax professionals to help you file your claim in the first place.

Our team can help you with your Employee Retention Tax Credit application every step of the way and be sure all of the information that the IRS needs for your application gets to the agency. Our tax attorneys can verify your refund amount and handle the more complex parts of the process for you so you can focus on your business and not be concerned with an incorrectly claimed ERTC. 

The Dayes Law Firm team and our partner firms have assisted businesses file for millions in refunds through the Employee Retention Tax Credit program so far, and if you need support navigating the ERTC process, we can help. 

Please contact us without delay to learn more about how we can assist you with the ERTC by calling (800) 503-2000. We look forward to working with you!