What Should I Do if I Was the Victim of an ERTC Scam?

December 21, 2023
Dayes Law Firm

The Employee Retention Tax Credit (ERTC) is a refundable tax credit designed to help businesses that suffered pandemic-era financial losses keep their employees on the payroll. Unfortunately, the financial opportunity prompted a wave of aggressive ERTC scams promising to help employers claim their credit — sometimes fraudulently. Many of these scams exaggerate or outright misrepresent who can qualify for the tax credit.

As a consequence, the IRS has received a significant number of ineligible and fraudulent claims. Businesses that improperly claim the credit will have to return the refund, possibly with penalties and interest. In some cases, the misuse of the ERTC may trigger criminal investigations.

If you believe you may have been the victim of an ERTC scam, you should contact an ERTC attorney or trusted tax professional as soon as possible. 

How Do Scammers Reach Victims?

Ads promoting unauthorized ERTC services have appeared across a variety of mediums, including radio, television, and the internet. Sometimes, scammers will even attempt to contact potential victims directly via phone calls and text messages.

The IRS has also found that some unscrupulous ERTC promoters send letters from official-sounding groups that do not actually exist, such as the “Department of Employee Retention Credit.” They often attempt to pressure taxpayers by urging immediate action. 

If you have responded to an unsolicited text message, TV ad, or direct mailing like this, you may have fallen victim to an ERTC scam.

How Can I Spot a Scam?

Fraudulent ERTC promotions tend to do one or several of the following:

  • Mention an “easy application process”
  • State that they can determine whether you are eligible for the credit within minutes or before discussing the facts of your case
  • Charge hefty fees upfront or based on a percentage of the ERTC refund amount received
  • Instruct businesses to claim the ERTC because they have “nothing to lose”
  • Suggest that employers ignore the advice of their trusted tax professional or attorney
  • Leave out key details like specific eligibility requirements or how to calculate the credit

In reality, the ERTC is a complex initiative that requires careful review and intricate calculations. If you make a mistake when filing, you may not receive the refund you are entitled to receive, or you may receive a refund that you are ineligible for. When a promoter makes it sound too good to be true, it probably is. If this describes your case, you may have to withdraw your ERTC claim to correct your tax situation.

What Is the IRS Doing About It?

The IRS knows that dishonest ERTC credit promoters have misled business owners. To deal with the influx of fraudulent and ineligible claims, the agency has taken the following actions:

  • Temporarily stopped accepting new ERTC applications while continuing to process previously filed claims
  • Implemented stricter compliance reviews, which has lengthened the processing time for ERTC claims
  • Issued FS-2023-24, which provides a procedure for taxpayers to withdraw their ERTC claims without penalties

What Can I Do If I Was a Victim of an ERTC Scam?

If you believe you fell victim to an ERTC scam or otherwise filed an inappropriate tax credit claim, contact Dayes Law Firm promptly. Our skilled ERTC attorneys understand the complex ERTC rules, are up to date on the most recent IRS guidance, and can assist you with the claim withdrawal process if necessary.

Call us at 800-503-2000 for a free consultation today. The team of experienced tax attorneys at Dayes Law Firm will discuss your ERTC situation and determine the steps you should take next.