If you are a business owner and haven’t heard of the term “ERC”, I’d like to join you under whatever rock you’ve found to block out the real world.  I feel like I’m constantly being bombarded with spam calls, emails, and advertisements online about how I’m “missing out” on potential Employee Retention Credit (ERC) money.  Unfortunately, we’ve reached the point now where anyone that was actually eligible for ERC has already received it and now the scammers are going after anyone they can get their hands on.  Let’s talk about the current consequences and how to easily spot an ERC scam.

It’s gotten so bad that now, in an unexpected turn of events, the IRS has temporarily suspended the processing of ERC claims, citing suspicions of fraud or questionable interpretations of tax regulations. Described by the IRS as a “tsunami” of claims, the surge has prompted a pause in processing new claims until at least January 1, 2024.

Timeline for Open Claims

With the temporary suspension, businesses will have to wait until at least the beginning of 2024 for the IRS to resume handling new ERC claims. Meanwhile, existing claims will continue to be processed, albeit at a much slower pace.

What To Do if You Suspect Your Claim is Fraudulent

I’m sure some of these scammers have really good salespeople, so if you have already submitted ERC claims and believe they are incorrect due to misguided advice, there’s an option to withdraw these claims to avoid penalties. However, it’s crucial to note that withdrawing a claim does not shield businesses from potential consequences. If the IRS suspects a willful filing of a fraudulent claim, it may initiate a criminal investigation, even if the claim is withdrawn.  They have, however, acknowledged the complexity surrounding ERC claims and are developing a program for businesses that received ERC refunds and now believe their claims were improper. To participate in this program without facing penalties and interest, businesses must repay the refund. Additional details on this relief program are expected to be released before the end of the year.

How to Easily Spot an ERC Scam

The American Institute of Professional Bookkeepers (AIPB) issued a cautionary note for ERC claim filers: be wary of contingency fees, especially those payable before receiving a refund. Contingency fees for tax advice are prohibited by professional organizations, including the AICPA. Businesses should exercise vigilance and avoid arrangements that might raise suspicions.

So, in conclusion, be wary of anyone out there trying to get you “free” money.  I think this same logic can be applied to those offering “grants” or any other too-good-to-be-true capital funds.  Always talk to a trusted advisor like your banker, bookkeeper, or CPA before making any moves.  The Small Business Development Center (SBDC) and Maryland Women’s Business Center (MWBC) are also great places to go seeking advice.  The internet is wild my friends, stay safe out there!