May 23, 2023

The Skinny on ERTC Scams

Business Income Tax


Minutes to read

Safeguard your business against schemers while utilizing the tax credit benefits.

As the pandemic took a toll on many businesses, the government launched various relief programs to help weather the storm. The Employee Retention Tax Credit (ERTC) emerged from a federal relief package to assist eligible business owners in recovering a portion of their financial losses.

In essence, the ERTC is a refundable tax credit for qualified businesses.

Scammers are now exploiting this situation, luring unsuspecting businesses into fraudulent schemes. Their plans are fueled by misinformation and persuasive maneuvers that lead to confusion surrounding ERTC qualification.

The Lure Behind the Scam

Qualified taxpayers can potentially earn up to $26,000 for each full-time employee during the credit's lifetime.

These third-party scammers deceive business owners into believing they are eligible to claim the ERTC, often charging an upfront fee for their services and taking a cut of the credit.

If a taxpayer's claim is rejected, the business is left to fend for itself.

Avoid Falling Victim to Scams

The IRS has issued multiple warnings about ERTC scams saying, "Taxpayers are always responsible for the information reported on their tax returns. Improperly claiming the ERTC could result in taxpayers being required to repay the credit along with penalties and interest."

To avoid falling prey to scammers, consider the following:

  • Steer clear of third-party promoters who aggressively advertise the ERTC.
  • Collaborate with a trusted CPA; they can advise on your eligibility for the ERTC under IRS rules and whether claiming the tax credit is in your best interest.
  • Thoroughly understand the criteria for ERTC qualification.
  • Always be skeptical of offers that seem too good to be true, as they likely are.

By staying informed and vigilant, you can protect your business from the potential pitfalls of ERTC scams and take advantage of legitimate opportunities to recover from the financial challenges brought on by the pandemic.

Your Business May Still Qualify

Despite the presence of malicious schemers, many businesses may still qualify for the ERTC. An employer is eligible for the ERTC if it:

  • Suffered a full or partial suspension of operations limiting commerce, travel, or group meetings due to COVID-19 and orders from an appropriate governmental authority.
  • Experienced a significant decline in gross receipts during 2020 (50% compared to the same quarter of 2019) or a decline in gross receipts during the first three quarters of 2021 (20% compared to the same quarter of 2019).
  • Qualified in the third or fourth quarters of 2021 as a recovery startup business.

Employers who meet these criteria can file amended payroll tax returns by April 15, 2024, for the 2020 tax year, and by April 15, 2025, for the 2021 tax year.

If you are still unsure whether your business qualifies, contact Brian Haines for further assistance.

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