As the Employee Retention Credit (ERC) has ended, scammers are using the situation to scam people of their funds and personal information. Business owners must be vigilant and aware of the constantly evolving ERC phone call frauds. This article provides a comprehensive guide to defending yourself from these dangers. It covers the basics of the ERC, typical scammers’ ruses, and seven ways to prevent Employee Retention Credit Scams. Learn here how to avoid these scams and protect your business from fraud.
What is ERC?
Businesses impacted by COVID-19 are eligible for the Employee Retention Credit (ERC). It provides a no-return tax credit to businesses that kept paying their employees when they were closed down or had large drops in gross receipts between the year March 13, 2020, and December 31, 2021. The percentage of qualifying wages has since been raised, reaching 70% for 2021. The American Rescue Plan has extended the Employee Retention Credit’s availability to small firms through December 2021, allowing firms to deduct up to $7,000 per employee every quarter from their payroll tax obligations.
What are ERC scams?
The ERC can give companies thousands of dollars to get them through hard financial times. Scams, however, have become more prevalent and are now more likely to target firms that might not know how to use or access these and other tax benefits. Below are some frequent employee retention credit scams:
Fake ERC advisors
A false advisor scam is one typical ploy. A scammer will pose as an ERC experts and offer to assist companies with their applications for free or at a minimal cost. Additionally, the scammers could demand payment in advance for their services, but instead of accurately submitting the paperwork, they keep the cash.
Before using the services of a professional advisor, always conduct a comprehensive background check and confirm that the appropriate regulatory agencies accredit them.
Applying For False ERC Claims
Some ERC fraudsters submit false ERC claims to the IRS on your behalf while posing as tax experts. You will, regrettably, be responsible for the information from your tax return because this results in ERC fraud. When you are audited, these dishonest businesses are nowhere to be discovered. They might overestimate your credit so they can keep the money.
Identity theft
Fraudsters could steal and use your personal information to apply for credit in your name. Never divulge private information to those outside of a trusted network. Never click on phony emails or texts, and never give your personal information to anyone contacting you on behalf of the IRS or another government organization.
Using False Employee Data
Fraudulent credit claims may also be made by scammers using false employment details. To falsely claim credits entails hiring fictitious employees or assuming the identities of others.
Exaggerating wages
Exaggerating pay to get more employee retention credit is another deception. This is manipulating payroll records to claim higher compensation for employees than what was paid to them to maximize the credit.
Credits for Non-Eligible Employees
Beware of scammers filing false claims for employee retention credits. They may try to get sensitive information or quick cash. Always be cautious and work only with legitimate companies.
Ways to Avoid Employee Retention Credit Scams
Employee retention credit scams can be costly and disruptive to your business, so it’s important to protect yourself by understanding how these schemes work and the precautions you can take. The key to avoiding ERC scams is knowing how they target businesses and which tactics they use. Here are seven things you can do:
Be Alert to Any Questions You May Receive
Practice caution when sending personal or financial information over email, text, or phone. The IRS may visit or call when required, although normal mail is typically how they first make contact. Although scammers may be aggressive and threatening, the IRS does not communicate with taxpayers regarding tax bills or refunds by email, text, or social media.
Speak with the IRS When Unsure
Because of such frauds, you might be reluctant to respond to an official IRS notification you receive in the mail. It is easy to contact the IRS to be sure the message you received was from the organization and not a shady third party. Before responding to anything, even if it seems valid, do this to get more information. To reach the IRS, dial 800-829-1040.
Thoroughly check a service
When requesting assistance to obtain the ERC, use caution. Some dishonest businesses can try to con you out of additional money. Ask them about their experience and relevant paperwork. Verify that they can produce evidence in the event of an audit. Stay cautious and steer clear of con artists.
Learn the ERC’s Fundamentals
Even if tax law isn’t your thing, you may still grasp the fundamentals so that you have a general idea of how companies work and what wages you can deduct. Before working with a third party, do your homework to help you see a red flag or an incorrect number. Make sure you can access all service documentation so you can confirm everything.
Inquire Regarding Audit Defense Services
Additionally, you need to determine if a tax or business expert will support you in the event of an audit. Accountants and legitimate companies will be able to assist you. Get a written explanation of how this will function from the servicer. A dishonest business won’t be able to guarantee your audit defense.
Demand clarification on the pay structure
Understanding a third party’s payment procedure is essential when working with them. Will you make the payment now or after the claim is submitted? How do they wish to be compensated? Beware of upfront fees and avoid sending wire transfers to various third parties. Only assume your condition after the servicer promises a refund; remember this.
Inform the IRS of any scams.
Avoid falling victim to phishing scams! Don’t enter your information into forms or click on fake links. Call the IRS at 800-829-1040 or email phishing@irs.gov to report any questionable communications. Call the Treasury Inspector General for Tax Administration at 800-366-4484 to report IRS impersonator schemes.
Conclusion
Employee retention credit call scams are becoming increasingly common, with scammers posing as ERC experts and offering to help businesses apply for the credit at little or no cost. To avoid falling victim to ERC scams, be cautious of unsolicited phone calls or emails, verify the legitimacy of any offers or claims, and seek advice from trusted sources.
FAQs
What are some common ERC scams to watch out for?
One common ERC scam is the false advisor scam, where a fraudster poses as an ERC expert and offers to help businesses apply for credit at little or no cost. Scammers may also make false claims about eligibility or charge a big fee to “help” you claim the credit.
How can I protect myself from ERC scams and harassment?
Be wary of unauthorized calls or emails, check the integrity of any offers or promises, and seek guidance from reliable sources to safeguard yourself against ERC scams and harassment. Any questionable activity can also be reported to the IRS or other appropriate authorities.
