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Employers: Watch out for Employee Retention Credit schemes

The IRS and tax professionals continue to see third parties aggressively promoting Employee Retention Credit schemes on radio and online.

Filers should carefully review the ERC guidelines before trying to claim the credit and be wary of offers promising tax savings that are too good to be true. Tax professionals are also reporting receiving undue pressure from clients to claim the ERC as a result of these scams.

These promoters push ineligible people to file a claim for the credit while charging the filer either large upfront fees or a fee that is contingent on the amount of their refund. Plus, the promoters may not inform taxpayers that they must reduce the wage deductions they claimed on the business’ federal income tax return by the amount of the credit.

The IRS has been warning about this scheme since last fall, but there continue to be attempts to claim the ERC made by ineligible filers during the 2023 tax filing season. This is a valuable credit for those who qualify but claiming it improperly could result in taxpayers having to repay the credit along with potential penalties and interest.

Read the full IRS article here.