The Employee Retention Credit is the most powerful credit available to businesses nationwide. But with scams and unreliable providers on the rise, growing concerns have led to the IRS moratorium on ERC to protect honest taxpayers. Specifically, the IRS will not be processing new claims for this quarter, i.e., through December 31st, 2023.
There is now considerable confusion among eligible businesses, as several news agencies have declared ERC has sunset or been eliminated. This is not true; the intent behind not processing new claims is to review backlogged claims with increased scrutiny and due diligence in order to weed out inflated and fake claims. This doesn’t mean the ERC is shutting down or the IRS is refusing to pay refunds against valid claims now or in the future.
The IRS is now urging businesses with legitimate claims to continue filing, asking them to review with a trusted tax advisor and not with ERC mills that appeared during the pandemic. Businesses need to watch out for scammers and unscrupulous promoters who wildly exaggerate who can qualify for ERC and inflate the value of this credit.
5 Fake ERC Provider Warning Signs
Lack of Experience
An experienced ERC provider should be familiar with all aspects of ERC processing. They should know the requirements and guidelines to qualify for the credit, the application process, the documentation required, and how to file for it. If a provider has little or no experience or cannot provide clear guidance for the process, you’ll want to steer clear. These are clear signs that the provider set up shop during the pandemic. These fly-by-night-providers promote aggressively “easy,” “risk-free,” and “instant” ERC qualification to unsuspecting businesses. In fact, many such enterprises only offer ERC and have no experience with other credits and incentives, potentially indicating that they’re promoters looking to make a quick buck off of unsuspecting businesses.
Be wary of calls, emails, or advertisements from providers promising an “easy application process” for the ERC. ERC evaluation takes strict scrutiny and adherence to IRS standards. Legitimate providers should not be aggressively marketing their services to unsuspecting businesses. Frequent unrealistic emails or calls from an ERC provider, showing excessive excitement, offering an unbelievable promise, or cross-selling – are red flags. No authentic tax consultant engages in aggressive solicitation as the demand for their services is naturally high.
When it comes to claiming ERC, providers should never charge upfront fees. This practice is not only unethical but also illegal. ERC scams are rampant, and many have fallen prey to these fraudulent activities. Scammers often ask for an upfront fee to help claim the ERC, only to disappear once the payment has been made. It is important to note that ERC providers are not allowed to charge fees until after the ERC has been successfully claimed. This regulation is put in place to protect individuals from fraudulent activities. Therefore, it is always advisable to be cautious and do thorough research when choosing a provider to claim your ERC. Remember, if a provider asks for upfront fees, it may be a red flag, and you should always exercise caution before proceeding with such providers.
Quick Eligibility Determination
Beware of providers who promise instant determination of your ERC eligibility without considering your tax situation. The ERC involves complex calculations and a thorough review before applying. If a provider claims they can determine your eligibility within minutes or without a detailed discussion about your business’s taxes, it’s probably a scam. Take the time to carefully assess the complexities of the ERC before making any decisions.
Lack of Transparency
A legitimate ERC service provider operates transparently, informing potential clients of how the process works and providing clear information about fees associated with their services. Consider it a red flag if a provider avoids answering your questions or the response is unclear. Some ERC scams are designed to deceive business owners by omitting or hiding information prospects should know about the audit or investigation process.
If a promoter advises you to ignore the advice of your trusted tax professional, it’s a red flag. Always consult with an experienced tax professional before making any decisions. Consider it a red flag if a provider avoids answering your questions or the response is unclear. Some ERC scams are designed to deceive business owners by omitting or hiding information clients should know about the audit or investigation process.
As the IRS moratorium on ERC expires at the end of this quarter, it is crucial for business owners to be aware of the potential risks and red flags of dubious ERC providers. A genuine and reputable ERC provider can help you maximize tax-related credits and save money for your business. Stay vigilant and informed when choosing your ERC service provider to safeguard against fraud and scams. Always look for credentials, fee transparency, and reasonable promises. Be prepared to ask questions, and don’t hesitate to request references when selecting an ERC provider. Do your due diligence and protect your business from becoming a victim of fraudulent ERC providers.
alliantgroup has been helping American businesses navigate complex tax credits and incentives for the past 20 years. Our team of experts includes former IRS commissioners and policymakers who clearly understand the ERC’s qualification criteria and value. Additionally, we have disqualified nearly ten thousand claims because we strictly follow the most up-to-date criteria prescribed by the IRS. With two decades of experience in delivering tax credits and incentives, we will continue to spread awareness and empower small businesses without compromising the integrity of the process.