On July 25th, a webinar was presented by the IRS to help businesses comply with Employee Retention Credit (ERC) requirements and avoid the consequences of ERC fraud. The IRS webinar also highlighted the rise of ERC schemes, which encourage businesses to file for the ERC even if they aren’t eligible.
Qualifying businesses and tax-exempt organizations can obtain the Employee Retention Credit, which is a refundable tax credit designed to provide relief for businesses that were affected by pandemic-related shutdowns.
Eligible organizations that paid employees after March 12, 2020, and before October 1, 2021 (or January 1, 2022, in the case of recovery start-up businesses) could obtain this tax credit. It’s actually still possible to apply for the ERC since the statute of limitations is five years from the third and fourth quarters of 2021.
In order to qualify for the ERC, a business would have to prove at least one of the following:
Businesses that apply for the Employee Retention Credit without being eligible may face penalties or even criminal charges from the IRS, which is why compliance is so important. During the webinar, the IRS identified were identified four key areas of ERC compliance:
When it comes to intentional fraud to obtain the Employee Retention Credit, there are three main types.
There’s also another type of Employee Retention Credit fraud, although it isn’t intentional on the part of the employer. This happens when a business falls prey to an ERC Mill scheme.
Here's how it Works:
If your business falls prey to one of these schemes, it’s still possible to avoid IRS penalties. The most important part is to document every step, so that the business can prove to the IRS that they did their part to fix the situation.
In the IRS webinar, businesses who accidentally got involved in an ERC scheme (and received a refund) were advised to take their checks to an IRS Taxpayer Assistance Center and explain the situation to an IRS representative. They’ll also have to amend their tax return, which will prove that they took the necessary steps to make things right.
There isn’t a voluntary disclosure program specifically for the Employee Retention Credit, but there are several ways to report potential fraud. These include:
Staying ERC compliant and avoiding fraud isn’t that difficult, especially for businesses that make sure they use legitimate tax preparers. By staying on top of IRS regulations, eligible businesses can benefit from the Employee Retention Credit and avoid audits or penalties.
At Complete Payroll, we are committed to combating these unfair practices and ensuring that no business falls victim to deceptive services or excessive fees. Our goal is to guide you through the ERC claim process with transparency, integrity, and genuine support.
If you would like to learn more about our ERC Filing Service or need assistance in determining your eligibility, please visit our ERC Page for additional information.