Businesses Warned Of Employee Retention Credit Scam
Promoters have been targeting businesses with inflated promises over the Employee Retention Credit (ERC), a tax credit designed to help businesses that were negatively impacted by the COVID-19 pandemic. These so-called “ERC mills” often charge upfront fees for claim preparation and take a commission on any credit the business receives. However, as our Washington, DC business litigation knows, their filings are often inaccurate and ineligible, and businesses may end up owing repayments, penalties, and interest.
What Is The IRS Doing To Protect Businesses?
The IRS has placed a temporary moratorium on processing new ERC claims due to the surge of questionable filings. The agency is also working to develop new protections and safeguards to prevent bad claims from being filed.
What Should You Do If You’ve Already Filed?
If you’ve already applied for the ERC and are unsure as to whether your business legitimately qualifies, contact a lawyer right away. They can evaluate your eligibility and, if necessary, help you withdraw your claim or apply for settlement relief.
- Withdraw your claim: You can withdraw your amended return that includes your ERC claim as long as your claim has not been processed and paid. Make a copy of the adjusted employment tax return(s), write “withdraw” in the left-hand margin, and have an authorized executive print and sign it with their title and the date. Withdrawal requests should be faxed to the IRS’s ERC claim withdrawal fax line at 855-738-7609. If your return is already under audit, work with your examiner to prepare a withdrawal.
- Wait for the ERC settlement program: The IRS is also developing a settlement program for businesses that received an ERC tax credit that they now believe to be in error. The program can help businesses to avoid penalties and future compliance actions.
Beware The Consequences
Businesses that did not legitimately qualify for the ERC but received funds in error or a fraudulent submission will be required to repay the credit with interest and penalties.
The Department of Justice is prosecuting advisors who repeatedly submit false forms. Enforcement agencies can obtain the names of businesses that filed through an alleged fraudster and may use those client lists to trigger future audits. Additionally, the IRS may impose interest and penalties on the erroneous claims, further increasing the financial burden.
When faced with issues related to ineligible claims for the Employee Retention Credit (ERC), seeking legal guidance from a reputable firm like ours, Mahdavi, Bacon, Halfhill & Young, PLLC, is a prudent step. Our experienced legal team can provide invaluable assistance in navigating the complexities of ERC compliance and resolving any associated challenges. We will assess your situation, provide sound advice, and help formulate a strategy to address the issue appropriately. With our seasoned legal team that is knowledgeable on employment regulations, you can rely on us to protect your business’s interests and guide you toward a resolution that minimizes potential legal repercussions. If you may be at risk, it is important to take action immediately and call our firm today.