Is Employee Retention Credit a Scam? How to Spot ERC Scams

Employee Retention Credit Fraud on the Rise: Learn How to Avoid an ERC Scam

The Employee Retention Credit (ERC) is a lucrative reward, potentially granting eligible businesses up to $26,000 per employee in tax credits! The program, also known as the Employee Retention Tax Credit (ERTC), is a much-needed lifeline for companies that suffered financial setbacks due to the COVID-19 pandemic. Unfortunately, the high value of the refund has also resulted in a significant spike in Employee Retention Credit scams. In some cases, fraudsters are leveraging the widespread confusion and complexity surrounding ERC, luring the uninformed with inflated promises just to line their own pockets. They’re running aggressive marketing with misleading information, promising big and easy refunds, and telling businesses they qualify when they don’t. The result? Some employers have been caught up in a money grab that has cost them thousands of dollars in IRS penalties. Now many are left in doubt. Is Employee Retention Credit a scam? And if it’s not, then how can one avoid an ERC scam? Read on to learn more!

Is the ERC a Scam?

Most definitely not. ERC is a legitimate tax credit that provides relief to eligible employers that were impacted by COVID-19. However, misinformation is everywhere, with unscrupulous actors encouraging unqualified businesses to file for Employee Retention Tax Credit anyway. Watch out for such “consultants” and the various ERC tax credit scams in operation. According to the IRS, ERC scams – such as claiming the credit improperly or such as claiming credit when not qualified – can lead to costly repayment fines and interest. And guess what? Predatory agents may quickly disappear after making a hefty profit, leaving you to deal with the unpleasant aftermath yourself.

Important: Scammers may claim to be tax professionals, accountants, or even IRS representatives. But let’s be clear. Not all third-party ERC service providers will lead you into the perils of ERC credit scams. Many Employee Retention Credit firms are completely legit and committed to offering genuine help.

Telltale Signs of an Employee Retention Tax Credit Scam

The IRS continues to warn businesses about ERC program scams. It has identified several red flags to look out for to avoid IRS ERC scams and claim the refund the right way. These include:

  • Unsolicited ads, texts, emails, or calls from unknown entities or individuals highlighting an “easy application process” without any discussion of eligibility. ERC filing is a complex process that requires a careful review of a business’s eligibility and tax situation before application.
  • Large upfront payment (usually a percentage of the amount the employer will supposedly receive) to file for the credit.
  • Agents claiming that businesses have nothing to lose. Well, they do. If an employer claims the ERC when they don’t qualify for it, they have to pay it back, likely with substantial penalties.
  • Promoters leaving out key information about the Payroll Protection Program (PPP). Predatory agents won’t tell businesses that they cannot claim tax credits on wages paid under the PPP. It’s crucial that employers educate themselves about the ERC and PPP so they’re not double-dipping.
  • Requests for personal information such as credit card, bank account, or social security details.
  • Agents who claim that businesses can file for ERC outside of their federal tax return.  

 

These aren’t the only ways to identify Employee Retention Tax Credit scams. Do your own research, trust your instincts, and when in doubt,  seek advice from a trusted and reputable Employee Retention Credit help provider.

How Headcount ERC Can Help You Avoid an ERC Scam

Even though ERC itself can legitimately help businesses reclaim huge sums of money, not everyone qualifies for the credit. ERC scammers are well aware of this fact and are capitalizing on this knowledge to exploit under-informed, vulnerable employers. The promise of big, fast funds can seem enticing, for sure. But falling for an Employee Retention Tax Credit scam can ultimately inflict considerable financial burdens on your business. We don’t want that to happen to you. That’s why here at Headcount ERC, we’re committed to offering accurate information and trustworthy guidance on ERC eligibility. We help minimize your risk of ERC scams while streamlining the application process so you can effectively claim your tax credits. And you don’t pay us until you receive your refund! Contact us to find out how you can safely secure the reward you rightfully deserve.

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