Employee Retention Credits (ERC) are the target of a widespread tax scam for 2023, according to the Internal Revenue Service, and you may have recently seen advertisements for this scam.
The refundable tax credit was created to assist businesses that continued to pay employees despite being forced to close due to the COVID-19 pandemic, or who experienced significant income declines.
Employee Retention Credits Scam
The IRS states that third parties continue to market their services to taxpayers who may not be eligible for the ERC.
Unfortunately, these advertisements, along with the proliferation of websites promoting how simple it is to qualify for the ERC, lend a veneer of legitimacy to fraudulent refund claims.
Many of these third parties fail to inform prospective clients of the fact that they cannot claim ERC on wages that have already been reported as payroll costs in order to obtain Paycheck Protection Program (PPP) funds.
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Increased Tax Credits Marketing
Eligible taxpayers may claim the ERC on an original or amended return for wages paid between March 13, 2020, and December 31, 2021; however, according to the IRS website, the following requirements must be met:
- Sustained a full or partial suspension of operations in 2020 or the first three quarters of 2021 due to government orders restricting commerce, travel, or group meetings as a result of COVID-19.
- Significant decline in gross receipts in 2020 or in the first three quarters of 2021.
- Qualified as a startup recovery business for the third or fourth quarters of 2021.
These credits for the pandemic era are not available to just anyone, according to Werfel, who noted that they are governed by strict regulations. People should remember that the IRS is conducting active audits and criminal investigations in relation to these false claims. We urge honest taxpayers to avoid getting involved in these schemes.
If you suspect you have been a victim of fraud or phishing, the IRS encourages you to send an email to [email protected] and contact the Treasury Inspector General for Tax Administration at (800) 366-4477.
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