Avoiding ERC Scams
Trusted Tax Credit Specialists
ERC Scams
Because the ERC is such a substantial tax credit, and because it is complicated for many business owners to understand, it has unfortunately attracted many scammers.
The number of ERC scams has caught the attention of the government. For example, during a Congressional ERC oversight sub-hearing this comment was made by Congressman Schweikhart of Arizona’s First District:
“ERTC scams and fraud have been increasing, so much so that the IRS has been warning about these schemes since the fall of 2020, encouraging businesses to be wary of aggressive ERTC marketing. The IRS noted various warning signs for consulting firms that may be bad actors. Unsolicited ads, calls, emails, texts from unknown persons, and statements suggesting that the consultant can determine ERTC eligibility and tax refund estimates within minutes.
In March 2023, the IRS added widely circulated promoter claims involving ERTC to the newly introduced annual ‘Dirty Dozen’ tax scam list.”
Red Flags That Can Indicate ERC Scams
- Promises to provide you with tax refund estimates within minutes.
- Charging extremely large upfront fees.
- Tax preparers refusing to sign the ERC return that is filed by the business so that just the taxpayer claiming the credit is exposed to risk.
- Claims from the company that you qualify for the ERC before the company looks at your situation.
- Claims from the company that you should submit the claim because there is nothing to lose – In reality, there can be substantial penalties for improperly trying to claim the ERC.
How to Avoid ERC Scams
- Be aware that if you did not own a business during 2020 or 2021, there is no possibility that you qualify for the ERC. If someone tells you otherwise, they are almost certainly a scammer.
- Only work with tax professionals who are trustworthy according to these IRS guidelines.
- Request a detailed worksheet that explains ERC eligibility and the calculations that the company made to determine your ERC amount.
- Ask for a copy of the government shutdown order that the company claims makes you eligible for the ERC.
- Read the IRS news release on avoiding ERC scams.
We’re the Good Guys!
Here at Ameriwest USA, we are happy to provide you with any documentation or other information you might need to feel comfortable moving forward with us as your ERC preparer.
We can also answer any other questions that you might have.
LINKS TO IRS WARNINGS
IR-2023-170, Sept. 14, 2023– Red flags for Employee Retention Credit claims; IRS reminds businesses to watch out for warning signs of aggressive promotion that can mislead people into making improper ERC claims
IR-2023-169, Sept. 14, 2023– Aggressive marketing to ineligible applicants highlights unacceptable risk to businesses and the tax system
Taxpayer Advocate Service- Published: August 17, 2023 | Last Updated: September 28, 2023– TAS Tax Tip: Don’t Fall Victim to an Employee Retention Credit Scheme
IR-2023-135, July 26, 2023– IRS Commissioner signals new phase of Employee Retention Credit work; with backlog eliminated, additional procedures will be put in place to deal with growing fraud risk
IRS Tax Tip 2023-93, July 24, 2023– Learn the warning signs of Employee Retention Credit scams
IR-2023-105, May 25, 2023– IRS alerts businesses, tax-exempt groups of warning signs for misleading Employee Retention scams; simple steps can avoid improperly filing claims
April 25, 2023– Beware of Employee Retention Credit scammers
IR-2023-71, April 5, 2023– IRS wraps up 2023 Dirty Dozen list; reminds taxpayers and tax pros to be wary of scams and schemes, even after tax season
IR-2023-59, March 27, 2023– Dirty Dozen: IRS warns individuals to stay clear of shady tax preparers; offers tips on carefully choosing tax professionals
IR-2023-49, March 20, 2023– IRS opens 2023 Dirty Dozen with warning about Employee Retention Credit claims; increased scrutiny follows aggressive promoters making offers too good to be true
IR-2023-40, March 7, 2023– IRS issues renewed warning on Employee Retention Credit claims; false claims generate compliance risk for people and businesses claiming credit improperly
COVID Tax Tip 2022-170, November 7, 2022– Employers: beware of third parties promoting improper employee retention credit claim
IR-2022-183, October 19, 2022– Employers warned to beware of third parties promoting improper Employee Retention Credit claims
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What Are Employee Retention Credits?
The Employee Retention Credit, or ERC, was introduced in 2020 as part of the CARES Act to provide relief to businesses who were able to keep their employees on the payroll in 2020 and 2021.
If your business experienced a partial or complete shutdown due to a governmental order, or had a severe decline in gross receipts, your business could qualify for ERC. Unlike a tax deduction or a loan, ERC is a tax rebate of the taxes you’ve already paid, putting cash back directly back into your business.