Warning: False Employee Retention Credit Offers Continue
The IRS is reminding employers to be vigilant about Employee Retention Credit eligibility as businesses continue to fall victim to scams.
The IRS and tax professionals said third parties are aggressively advertising schemes through broadcast, direct mail solicitations, and online promotions.
Officials said many of those are misrepresenting and exaggerating who can qualify for the credits.
The IRS released a number of alerts and increased staffing levels to handle ERC claims.
“The aggressive marketing of the Employee Retention Credit continues preying on innocent businesses and others,” IRS commissioner Danny Werfel said.
“They can pocket handsome fees while leaving those claiming the credit at risk of having the claims denied or facing scenarios where they need to repay the credit.”
Employee Retention Credits
A number of legitimately eligible businesses applied for the pandemic-era employee retention tax credit despite long processing times.
The program was designed as a refundable tax credit to help businesses who continued to pay employees during the pandemic despite shut downs.
The IRS is auditing and conducting criminal investigations related to the claims.
Businesses who improperly claim the tax credit could have to repay the funds along with penalties and interest.
IRS officials shared a list of warning signs for employers about ERC promotions:
- Unsolicited calls or advertisements mentioning an “easy application process”
- Statements that the promoter or company can determine ERC eligibility within minutes
- Large upfront fees to claim the credit
- Fees based on a percentage of the ERC refund amount
- Aggressive claims from the promoter that the business receiving the solicitation qualifies before any discussion of the group’s tax situation
Employers who use these companies could be at risk of someone using the credit as a ploy to steal the taxpayer’s identity or take a cut of an improperly claimed credit.
Businesses can report ERC abuse by completing Form 14242, Report Suspected Abusive Tax Promotions or Preparers.
The form and any supporting materials can be sent to the IRS Lead Development Center in the Office of Promoter Investigations.
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