What Happens if a Business Erroneously Claims the ERTC?

September 12, 2023
Dayes Law Firm

Some businesses are claiming the tax credit when they aren’t really eligible to do so, which could land them in serious trouble with the IRS. This is just another reason why, if you think you and your business may be eligible to claim the ERTC, you might want to consider working with tax professionals skilled in submitting tax credit claims to make sure you do it right. 

Claiming the ERTC in Error

In a warning from the IRS in March, Acting IRS Commissioner Doug O’Donnell said of the Employee Retention Tax Credit, “While this is a legitimate credit that has provided a financial lifeline to millions of businesses, there continue to be promoters who aggressively mislead people and businesses into thinking they can claim these credits.”

“Anyone who is considering claiming this credit needs to carefully review the guidelines,” he added. “If the tax professional they’re using raises questions about the accuracy of the Employee Retention Credit claim, people should listen to their advice.”

The truth is, claiming the ERTC in error can be costly. The same IRS warning noted, “Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.”

Costs of Erroneously Claiming the ERTC

Penalties from the IRS can be severe, and ultimately, a business owner could land themselves in a much worse financial position if they have to pay back the ERTC than if they had never erroneously claimed the ERTC in the first place. Not only would an employer potentially have to pay back the funds claimed through the ERTC program, but the IRS could also impose an accuracy-related penalty ranging from 20 to 40 percent of the underpaid tax.

And that’s not all – the IRS could choose to assert a civil fraud penalty of 75 percent of the underpayment. A business that claims the ERTC in error, whether willfully or not, could end up dealing with an audit, penalties, fees, and potentially even criminal charges or imprisonment. 

ERTC Claim Assistance 

An Employee Retention Tax Credit team, like the one at Dayes Law Firm, can help you apply for the ERTC as accurately as possible. The tax professionals at Dayes can assist with compiling all of the necessary documentation to prove you are eligible to claim the credit, and – if there are any ERTC application-related complications such as an audit – they can assist with a strong audit defense, too. 

We are confident a member of our experienced ERTC team can help you turn in an accurate claim for your business. The last thing we want you to have to deal with is an IRS audit, and we can help you with your claim from start to finish to avoid that possibility. We will assess whether your business is even eligible to claim this important tax credit, and then help you move forward with your application if you decide to work with our firm. 

Please contact us for a free, no-obligation consultation to see how we can assist you with the Employee Retention Tax Credit by calling (800) 503-2000 or by filling out the form on this page to get in touch with our team today.