Staying Vigilant: Employee Retention Credit Scams

Avoiding Employee Retention Credits Scams

On March 20th, the Internal Revenue Service (IRS) issued a critical press release alerting taxpayers to the 2023 “Dirty Dozen” list of tax scams. Among the highlighted schemes is a particularly concerning one related to Employee Retention Credit (ERC) fraud. The IRS has observed a rise in Employee Retention Credit scams and aggressive and deceptive tactics employed by unscrupulous promoters who are making extravagant offers that seem too good to be true. These fraudsters are luring unsuspecting taxpayers into schemes designed to illegally claim ERC credits.

What is the Employee Retention Credit (ERC)?

The Employee Retention Credit (ERC) was initially introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. The primary goal of the ERC was to provide financial relief to businesses severely impacted by the COVID-19 pandemic. This tax credit was designed to incentivize employers to retain their employees on the payroll during these challenging times. By doing so, the credit offered a financial cushion to help businesses maintain their workforce and navigate through the economic downturn caused by the pandemic.

Emergence of Employee Retention Credit Scams

Unfortunately, with the introduction of such a beneficial program, scammers have seized the opportunity to exploit the ERC. These fraudulent schemes are increasingly targeting businesses, promising to help them claim the ERC even if they are not genuinely eligible. The ERC scams can manifest in various forms, including unsolicited phone calls, phishing emails, and deceptive social media promotions. Scammers often use high-pressure tactics and false assurances to convince businesses to part with sensitive information or pay fees for services that do not deliver legitimate results.

How to Protect Yourself from Employee Retention Credit Scams

To safeguard against falling victim to these scams, the IRS advises taxpayers to remain vigilant and skeptical of any offers that appear too good to be true. It is crucial to exercise caution and avoid sharing sensitive personal or business information with anyone who claims they can guarantee ERC credits or who makes unsolicited contact. The IRS has also announced that it will increase its scrutiny of ERC claims in 2023, aiming to curb fraudulent activities and ensure that the credits are distributed only to eligible claimants.

Taxpayers should be proactive in protecting themselves from ERC fraud by staying informed about the warning signs of scams and promptly reporting any suspicious activity to the IRS. By doing so, businesses can not only avoid falling prey to these fraudulent schemes but also ensure that they receive any legitimate relief that the ERC program is intended to provide.

For more detailed information, including the full IRS press release, please visit this link

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