If it sounds too good to be true, it probably is. The IRS has issued numerous warnings about a concerning scam that revolves around the Employee Retention Credit (ERC). Unscrupulous third parties have been aggressively promoting false claims, suggesting that businesses may be eligible for the ERC when, in fact, they are not.

Key Points:

1. Beware of ERC Scams: Businesses should be cautious of third parties making false claims about ERC eligibility and promising easy refunds.
2. Understand the ERC Complexity: The ERC is a refundable tax credit with eligibility requirements, time periods, and dollar limitations that changed multiple times due to federal legislation. As a result, navigating the credit is more complex than scammers portray it to be.
3. Risks of Falling Victim: Businesses that fall for ERC scams can face serious consequences. Not only will they need to return the falsely obtained refund, but they may also be subject to penalties, interest, and the requirement to amend employment tax returns.

What is the Employee Retention Credit (ERC)?

The Employee Retention Credit is a refundable tax credit that was introduced during the COVID-19 pandemic as a measure to incentivize employers to keep their employees on the payroll during government shutdowns or significant declines in gross receipts. The ERC was made available to eligible employers for qualified wages paid after March 12, 2020, and before October 1, 2021 (with an exception for recovery start-up businesses through December 31, 2021).

Complexity of ERC Eligibility and Limitations

Throughout its existence, the ERC’s eligibility requirements, applicable time periods, and dollar limitations underwent several changes due to the passage of various federal legislation. As a result, claiming the ERC is far more complex than what these deceptive ERC schemes make it out to be.

Beware of Scam Tactics

Perhaps you have come across advertisements, phone calls, or text messages claiming that your business is eligible for the ERC and that the application process is “easy.” These third-party scammers often promise swift refunds and significant credits, luring businesses into their trap. They commonly charge substantial upfront fees or take a percentage of the refund amount generated by the ERC.

The Consequences of Falling Victim

Unfortunately, falling for an ERC scam can have severe consequences for your business. Not only will you be required to return the fraudulently obtained refund, but you may also need to amend employment tax returns, exposing your business to potential penalties and interest.

How Can You Safely Determine Your Eligibility?

If you genuinely believe that your business might qualify for the Employee Retention Credit, it is essential to work with reputable and experienced professionals, like YHB. Reach out to us, and we will be more than happy to help you navigate the complexities of ERC eligibility and assist you in determining whether you qualify for this tax credit.

Have You Been Scammed? We’re Here to Help!

If you have already claimed the ERC through a third party and suspect that it might have been a scam, don’t hesitate to contact us immediately. Our team of experts will work diligently to help you resolve any potential underpayments or erroneous refunds that may have occurred due to the fraudulent scheme.

Conclusion

As the IRS continues to battle against tax scams, it’s crucial for businesses to remain vigilant and informed about the latest schemes targeting them. The Employee Retention Credit (ERC) is a valuable tax credit that can provide much-needed relief for eligible employers, but it’s essential to approach the application process responsibly and avoid falling prey to deceptive offers. Working with trustworthy professionals is key to ensuring compliance and safeguarding your business’s financial well-being.

Remember, if something sounds too good to be true, it’s wise to double-check and consult with reliable experts before making any decisions that could impact your business’s financial future. Stay informed, stay safe, and protect your business from ERC scams.