Businesses Again Warned About Employee Retention Credit Scams, IR-2023-105

The IRS has an renewed alert to warn businesses against misleading employee retention credit scams. Employee Retention Credit (ERC) is a a refundable tax credit designed specifically for businesses that continued paying employees while shut down due to the COVID-19 pandemic or that had a significant decline in gross receipts during the eligibility periods. The IRS has been issuing warnings about aggressive ERC scams since last year. In light of the rise in these misleading claims, the IRS has increased compliance work and the IRS Criminal Investigation division is working to identify fraud and promoters of fraudulent claims;hence those who improperly claim the credit will face follow-up action from the IRS and they will have to pay it back with penalties and interest.

Taxpayers must watch out for warning signs of aggressive ERC marketing and promoters who lure businesses, tax-exempt groups and others into applying for the credit. Further, the IRS reminded qualified taxpayers to implement steps to protect themselves from making an improper Employee Retention Credit such as, working with a trusted tax professional and most importantly to report ERC abuse by mailing or faxing Form 14242, Report Suspected Abusive Tax Promotions or Preparers to the IRS Lead Development Center in the Office of Promoter Investigations.