Employee Retention Tax Credit scams have been on the rise since the program was introduced through the Cares Act.
Many companies are claiming they qualify for the credit without investigating if they actually do.
Falling into an ERC scam can be a costly mistake for businesses, as they can end up paying fees for a service they don’t need. If you’re approached by a company claiming they can help you file for the Employee Retention Tax Credit, be sure to do your research before hiring them.
There are many reputable companies out there that can help you file for the credit, so you don’t need to go with the first one you find. By doing your research, you can avoid falling victim to a scam.
“Only 4% of small business owners are familiar with the Employee Retention Tax Credit program.” — nfib.com
The employee retention tax credit is a payroll tax credit that is available to employers who retain their employees during the COVID-19 pandemic.
The credit is worth up to 50% of the wages paid to each employee, up to a maximum of $5,000 per employee. To be eligible for the credit, employers must have experienced a decrease in gross receipts of at least 50% compared to the same quarter in the prior year. The credit is available for wages paid after March 12, 2020 and before January 1, 2021.
Employers can claim the credit on their quarterly payroll tax return. The employee retention tax credit is an important tool that can help businesses keep their workers during these difficult times.
Because of the massive benefits of the ERTC program, it’s easy enough to see why scammers are looking to take advantage of business owners. However, we have created this guide to help you avoid ERC scams and Employee Retention Credit fraud.
ERC Scams – What Are They?
As the name suggests, an Employee Retention Tax Credit (ERTC) is a tax break that businesses can claim to offset the cost of retaining employees.
However, there have been reports of scammers attempting to take advantage of this credit. These scammers typically contact businesses and claim that they are entitled to a refund or tax offset related to the ERTC. They may even provide fake documents or forms to support their claim.
In some cases, scammers have successfully gotten businesses to provide personal information or make advance payments on the false promise of a large tax refund. If you are contacted by someone claiming to be from the IRS or another government agency about the ERTC, be wary. The best course of action is to always consult with a qualified tax professional before taking any action.
How To Avoid an Employee Retention Credit Scam or Act of ERC Fraud
1) Work with a company that has been around for a long period
When a company has been in business for a long time, it likely has stable finances. This is important when choosing a company to work with because you want to make sure they will be able to pay you what they owe you. In addition, a company that has been around for a while is more likely to have developed systems and procedures to avoid employee retention tax credit scams.
They are also more likely to have established relationships with government agencies and tax experts who can help them navigate the often-complex world of taxes. As a result, working with a company that has been in business for many years can help you avoid becoming the victim of an Employee Retention Tax Credit scam.
2) Make sure the company provides you with actual proof of ERC eligibility
To claim the credit, businesses must provide proof of employee retention to the Internal Revenue Service (IRS).
However, there have been reports of scammers claiming to be from the IRS and asking for personal information or money in exchange for proof of employee retention. Businesses should be wary of any unsolicited requests for personal information or payment.
They should only provide such information or make payments if they are confident that they are dealing with a legitimate organization. Making sure that the ERTC company you work with provides you with actual proof of Employee Retention Credit eligibility will help you avoid an employee retention tax credit scam.
3) Talk to a real person and avoid doing all communications via email
If you get an email from someone claiming to be from the IRS, don’t reply. Forward the email to firstname.lastname@example.org and then delete it. And if you get a call from someone claiming to be from the IRS, hang up and call 1-800-829-1040 to speak with an IRS customer service representative. By being aware of this scam and taking steps to avoid it, you can protect yourself from becoming a victim of identity theft.
4) Ask if the company offers audit protection
Asking if the company offers audit protection is one way to avoid being scammed. Audit protection means that if the IRS audits your company and determines that you were not eligible for the credit, the company will reimburse you for any penalties or interest you may owe. Therefore, by asking if a company offers audit protection, you can be sure that you are dealing with a legitimate business and avoid being scammed.
5) Have a clear understanding of the payment structure
The payment structure of an employee retention tax credit (ERTC) scam can be confusing and difficult to understand. By having a clear understanding of how the payment structure works, you can avoid being scammed.
If you are approached by someone who claims to be able to help you claim the ERTC, be sure to ask questions about the payment structure and look for red flags that may indicate a scam.
For example, you should be suspicious if someone asks for an upfront fee or promises a guaranteed refund. Scams can be costly and time-consuming, so it’s important to do your research and make sure you are working with a reputable source before moving forward. The right company will be able to calculate your ERC claim and provide a step-by-step breakdown of how they reach their final.
Tip: Take this 60 second quiz to see if you prequalify for the ERTC today!
6) Why is the company qualified to handle my ERC filing?
There are a few key things to look for when choosing a company to file your employee retention credit.
First, check to see if the company is registered with the IRS. This ensures that they are up-to-date on the latest tax laws and regulations. Next, make sure that the company has experience handling employee retention credit filings. This ensures that they are familiar with the process and can help you avoid any mistakes.
Additionally, you can ask for referrals from other businesses that have used the company’s services. This will give you an idea of the level of customer service you can expect. Choosing a qualified company to handle your employee retention credit filing is an important step in ensuring a successful outcome. If the ERC company checks off all of these criteria, it may indeed be qualified to handle your ERC filing.
7) Do they have a track record of successfully filing and clients receiving ERC
Given that the employee retention tax credit is a relatively new program, it’s essential to make sure that the company you’re working with has a track record of successfully filing for the credit and helping clients receive the maximum benefit. There are a few ways to go about this. You can ask the company for references from previous clients who have received the credit.
You can also check online reviews to see what others have said about their experience with the company. Also, you can contact your local Better Business Bureau to see if there have been any complaints filed against the company.
By taking these steps, you can be confident that you’re working with a reputable company that will help you take advantage of this valuable tax credit.
8) Make sure you understand the steps to qualify before signing a contract
When it comes to employee retention tax credits, it’s important to make sure you understand the steps needed to qualify before signing a contract with a company — especially given that a percentage of your money will be paid out to them for their service. There are a few key things to keep in mind, such as the number of employees you have and your tax liability.
By taking the time to do your research and understand the process, you can ensure that you maximize your chances of qualifying for this valuable tax credit.
9) Be provided with a realistic timeline for filing, processing, and receiving your ERC
When you are faced with the task of finding an employee retention tax credit company, it is important to find one that provides you with a realistic timeline for filing, processing, and receiving your ERC. Many variables can impact the amount of time it takes to receive your ERC, and a good company will take these into account when providing you with a timeline.
In addition, a good company will be upfront about any potential delays that could impact the processing of your ERC.
10) Does the ERC company offer financing to receive funds faster?
One important thing to consider when choosing a company to work with is whether or not they offer to finance. With ERC financing, businesses can receive their credits much faster, which can be critical for cash-strapped businesses. Therefore, it is important to find out if the company you are working with offers financing before you commit to working with them.
By doing so, you can ensure that you are getting the best possible service and that your business will receive the funds it needs as quickly as possible.
Tip: Take this 60 second quiz to see if you prequalify for the ERTC today!
What is the best way to protect yourself from ERTC scams?
The best way to protect yourself from ERTC scams is by being aware of the most common types of scams and knowing what to look for. One of the most common scams is when someone poses as an official from the IRS or another government agency to try and collect personal information or money.
Other common scams include fake charities, employment opportunities, and investment schemes. Be sure to research any organization or individual before giving them any money or personal information. If you receive a suspicious email, call, or text, do not respond and instead report it to the Federal Trade Commission.
Taking these precautions can help protect yourself from becoming a victim of an ERTC scam.
➞ While most of this guide has been devoted to what to look out for and how to avoid Employee Retention Credit fraud and ERC collections scams, there are legitimate companies that meet all of the criteria mentioned throughout this article. ERC Assistant is a company that checks every single one of these critical points.
What is ERC Assistant?
ERC Assistant is an ERC company powered by a team of fellow business owners who were negatively affected by Covid-19.
When the ERC program was launched and extended, they initially spoke to a few cost-saving firms to help them file and were told they were going to get around $600K. But then they found an incredibly knowledgeable and thorough firm that ended up getting them $2,189,755, which was $1.5M more than they thought they would get, just by choosing the right firm.
Since then, the ERC Assistant team has devoted themselves to helping businesses overcome hard times.
Their process is simple:
1) Take a 60-second quiz to see if you prequalify
2) They will match you with one of three different firms that they trust
3) Then it’s up to you to choose the one that’s right for you.
With their help, you can get the money you need to keep your business afloat – and thrive.
Click here to get started!
People Also Ask These Questions About Employee Retention Credit Scams
Q: What is an example of ERTC fraud?
- One example of ERTC fraud is when an employer reports false information to receive a larger tax refund than they are entitled to. This can be done by deliberately overstating deductions or income, stretching the truth about shutdowns or partial suspensions, or by claiming credits that the taxpayer is not eligible for. Taxpayers who commit ERTC fraud may also try to conceal assets or income in order to lower their tax liability. In some cases, taxpayers may even go so far as to create false documents to support their claims. ERTC fraud is a serious offense that can result in heavy fines and jail time. Consequently, employers need to ensure that they are truthful when filing their taxes.
Q: How can I spot an employee retention credit scam?
- To spot an employee retention credit scam, make sure you can identify certain clues that things may not be exactly how they appear. The program requires upfront payment: Be wary of any program that requires you to pay upfront to receive the credit. The IRS does not require businesses to pay anything to claim the ERTC. The program promises guaranteed approval: There is no guarantee that your business will be approved for the ERTC. The credit is subject to income and other eligibility requirements. The program uses high-pressure tactics: Scammers may try to pressure you into signing up for their program by promising quick approval or threatening deadlines. Don’t be rushed into making a decision – take your time and research any program before you commit.
Q: What are some warning signs of ERC fraud?
- It is important to look for warning signs that you should be aware of before attempting to commit fraud. First, the IRS will only allow businesses to claim the ERTC for wages that have been actually paid to employees. Second, businesses must maintain records of all employees who were paid wages during the period for which the credit is claimed. Finally, businesses that attempt to claim the Employee Retention Credit without maintaining proper records may be subject to audit from the IRS. As a result, businesses should exercise caution before attempting to commit employee retention credit fraud.
Q: What should I look for when working with a company to submit my ERC claim?
- When working with a company to submit your Employee retention credit claim you should look at a few things. Make sure that the company is familiar with the process and has a good track record of success. Next, ask if the company charges a fee for their ERTC services. While you may be able to find a company that offers free assistance with a fee paid out upon your credit being reimbursed, it is important to make sure that they will be able to provide the level of service you need. Finally, ask about the timeline for the submission of your claim. You will want to make sure that the company can meet your deadlines to avoid any delays in getting your credit. By following these simple tips, you can ensure that you obtain the best possible result when submitting your Employee retention credit claim.