Recognizing Employee Retention Credit Scams | Rea & Associates

Protect Your Business: Recognizing Employee Retention Credit Scams and Fraud

IRS Scams | Rea CPA

As a responsible business owner, you know the significance of Employee Retention Credits (ERC) provided by the IRS to help businesses retain their workforce during challenging times. However, with the benefits of ERC comes the risk of scams and fraud targeting unsuspecting employers. Being vigilant and well-informed can shield your business from falling victim to fraudulent schemes. We will walk you through the signs of ERC scams and how to safeguard your business against potential threats.

Check the Source 

One of the first steps in recognizing ERC scams is to verify the source of the information. Scammers often impersonate government agencies or official entities to deceive business owners. To avoid falling prey to fraud, always rely on credible sources for ERC-related information, and the primary source for official tax guidance is the IRS website. The IRS provides comprehensive details on eligibility criteria, application procedures, and genuine examples of ERC calculations. The IRS has a specific link for FAQs.

Beware of Unsolicited Emails or Calls

Scammers frequently use unsolicited emails or phone calls to approach businesses with enticing offers related to ERC. Be cautious of any communication claiming to expedite your ERC application or promising unrealistic benefits. The IRS does not initiate contact with taxpayers via email, social media, or phone calls, and genuine communications are typically delivered through traditional mail.

Scrutinize Requests for Sensitive Information 

Legitimate ERC applications do not require sensitive information, such as Social Security numbers, bank account details, or login credentials, upfront. Be wary of any request for such data, especially if it comes from an unknown source. Genuine applications submitted through the IRS follow a secure and standardized process. 

Verify Tax Preparers’ Credentials

Employers often seek assistance from tax preparers to navigate the complexities of ERC claims. However, entrusting your tax matters to an unreliable or unqualified preparer can expose you to scams. Always verify the credentials of tax professionals before engaging their services. Qualified tax preparers should hold valid Preparer Tax Identification Numbers (PTINs) issued by the IRS.

Cross-Check Eligibility Criteria

ERC is available to eligible employers affected by specific circumstances, such as government-mandated shutdowns or significant revenue reductions. Be cautious if someone claims your business qualifies for ERC without providing substantial evidence or verification of eligibility criteria. Familiarize yourself with the IRS guidelines to ensure your business meets the requirements for the credit.

Analyze Unusual Payment Requests 

Scammers may ask for upfront fees or payments to process ERC claims or offer to expedite the credit. Such requests are red flags for potential fraud. ERC applications are typically free, and legitimate IRS procedures do not involve any payments for claim processing. Avoid sharing any financial information or making payments to unknown entities.

IRS Warnings  

The IRS has issued several warnings urging people to carefully review the ERC guidelines before attempting to claim credit. Fraudulent promoters aggressively mislead unwitting individuals and businesses into making false claims for the ERC, often charging large upfront fees or fees contingent on the refund amount. The IRS is actively auditing and conducting criminal investigations related to false ERC claims, underscoring the severity of making inaccurate or fraudulent claims. 

Consult with Trusted Advisors 

If you encounter any suspicious ERC-related offers or communications, consult with your trusted Rea tax advisors. Seeking advice from experts can help you evaluate the legitimacy of the offer and safeguard your business against potential scams.

Recognizing the signs of Employee Retention Credit scams and fraud is vital to protect your business from financial losses and reputational damage. Stay informed and remain vigilant when dealing with unsolicited communications. Remember that the IRS never initiates contact via email, social media, or phone calls, and genuine applications for ERC are free of charge. By staying proactive and well-informed, you can confidently safeguard your business from potential scams and focus on its growth and success. Connect with us any time you have questions about protecting your assets. We are here for you!

By Greg Speece (Dublin office)