You’re a small business owner navigating the challenges of COVID-19, and you’ve heard of the Employee Retention Credit (ERC). But is ERC legitimate? And how do you avoid scams linked to it?
With so many fraudsters out there, it’s crucial to know what’s real. In this article, we’ll deep-dive into ERC, its eligibility criteria, common scams, and tips on protecting yourself.
You’ll learn how to confidently claim your rightful relief without falling victim to deceit.
WHAT IS THE ERC?
The ERC is a legit refundable employment tax credit that supports small businesses affected by the COVID-19 pandemic. It’s not a loan, so you don’t need to worry about paying it back. The credit helps employers keep their employees on payroll during these tough times.
What makes you eligible for the ERC? If your business operations were suspended due to government orders related to COVID-19 or if your gross receipts declined significantly compared to 2019, you’re likely eligible. If your business started after February 14th, 2020, and had annual gross receipts under $1 million, you’re also potentially eligible.
Remember, eligibility can vary across different calendar quarters within the same year. It’s crucial to understand and follow the specific rules per period.
Even though the designated credit periods have passed, there’s still time to file an ERC claim. You have up to three years after your original payroll tax returns’ due date to file. This gives eligible employers plenty of time to get those claims filed and receive the much-needed credits.
Understanding Eligibility Criteria for the ERC
You’ll need to ensure your business meets specific criteria to be eligible for this tax credit. Note – One very simple eligibility check is this credit is not available to individuals. It does include having significantly lower gross revenue in 2020 or 2021 compared to 2019. Another qualifying factor is if your business started operations after February 14, 2020, and has average annual gross receipts of less than $1 million.
Moreover, if your business experienced a full or partial suspension of operations limiting commerce, travel, or group meetings due to COVID-19 and government orders, you may qualify for the Employee Retention Credit (ERC). It’s important to note that eligibility can vary across different calendar quarters within the same year.
As you navigate through these prerequisites:
- Review financial records closely: It’s essential to compare quarterly gross revenues from 2019 with corresponding quarters in 2020 and 2021.
- Understand operational restrictions: Analyze how COVID-19 affected your daily operations thoroughly. Recognize periods where government orders might have resulted in suspensions or limitations on activities.
- Be mindful of the timeline: Remember that businesses launched post-February 14th, 2020 might also be eligible based on their annual gross receipts.
By understanding these eligibility criteria in-depth, you’ll better position yourself when applying for the ERC.
Keep in mind that this isn’t just about getting a tax credit; it’s an opportunity to bring stability back into your business amidst challenging times. We recommend consulting with an ERC tax expert if you’re unsure about anything – they could provide valuable insights shaped by their expertise and experience.
Most Common ERC Scams
You’re about to delve into a critical discussion that exposes the underbelly of Employee Retention Credit (ERC) scams. You’ll uncover the deceitful tactics employed by non-qualified ERC advisors, who not only mislead with their fee structures but also engage in identity theft and artificially inflate wages paid to maximize unwarranted benefits.
It’s crucial you understand these intricate fraud mechanisms, as they can severely impact your business; not just financially, but potentially legally too.
Non-Qualified Employee Retention Credit Advisors
Beware of non-qualified advisors who may try to convince you that your business qualifies for the Employee Retention Credit without thoroughly reviewing your financial situation. These individuals often see the ERC as a quick money-making scheme, rather than a lifeline for struggling businesses. They might make misleading claims or promise high returns without adequate evaluations.
Here are some red flags to look out for:
- Promises of guaranteed eligibility or high refunds
- Refusal to provide audit protection
- High-pressure sales tactics or reluctance to sign their name on filings
You deserve proper guidance through this complex process. Do thorough research, seek referrals and second opinions, and work only with qualified ERC Tax experts who can responsibly and accurately file your claim.
False or Misleading Fee Structures
It’s crucial to understand that some unscrupulous individuals may use false or misleading fee structures to exploit businesses seeking the Employee Retention Credit. They prey on your hope for financial relief, charging a large upfront fee based on an inflated estimate of your potential credit. While it’s normal for a fee to hinge upon the size of your ERC refund, these scammers manipulate this system to their advantage.
They might delay filing your claim or not file at all if they suspect rejection, leaving you out of pocket and without the promised aid.
Identity Theft
While applying for financial relief, employers must not overlook the risk of identity theft, as sensitive personal information is required to file a claim. As an employer seeking Employee Retention Credit (ERC), you need to be wary of fraudsters who might pose as ERC professionals with the intent to steal your sensitive data.
Always verify the credentials and reputation of any individual or company offering ERC assistance before sharing any personal or business information.
Be cautious if an ERC promoter insists on communicating only via email or online chats. This could be a red flag indicating potential identity theft.
Lastly, refrain from providing upfront payment without proper documentation and concrete proof of their service legitimacy.
Your vigilance can protect your business from these potential threats.
Inflation of Qualified Wages Paid
Some employers might be tempted to inflate their employees’ qualified wages in an attempt to increase their business tax credits. However, you should realize that this practice is not just unethical; it’s also illegal.
The IRS monitors the Employee Retention Credit (ERC) claims closely and can detect discrepancies easily. While the ERC offers relief for businesses affected by COVID-19, it isn’t a free-for-all fund. It has set eligibility criteria, including specific conditions on wages paid.
You’re responsible for your own tax returns, regardless of who prepares them. If you claim the ERC improperly or fall prey to a scam involving wage inflation, you’ll end up repaying the credit with penalties and interest.
To avoid such pitfalls, always ensure accuracy in reporting wages and understand all aspects of ERC before claiming any credits.
8 Tips To Avoid ERC Scams
Navigating the complex maze of Employee Retention Credit (ERC) can be daunting, and falling prey to scams is a risk you don’t want to take. Be wary of companies that make guarantees right off the bat without solid analysis. It’s important to have real conversations with knowledgeable individuals.
Verify their email addresses align with their names and company. Beware of inflated claims, and always insist on having your agreement in writing. This will ensure professionalism and keep you safe from potential fraudsters.
1. Avoid a Company That Makes Guarantees at the Outset
You should be wary of any company that makes guarantees about your ERC eligibility or the amount you’ll receive right at the outset. Reputable firms understand that determining ERC eligibility involves careful analysis, not hasty promises. Making such guarantees without a comprehensive review of your business operations and financials is a red flag for potential scamming.
Consider these points:
- Your ERC eligibility hinges on specific impacts COVID-19 had on your business. Promises made without this understanding are dubious.
- Participation in other pandemic relief programs can affect your eligibility—any firm ignoring this isn’t doing their due diligence.
- A genuine service provider will never assure you of an exact credit amount upfront without proper investigation.
Choose wisely to avoid falling into an unethical trap.
2. Talk to a Real Person
It’s crucial to have a live conversation with potential service providers, ensuring they’re willing and able to discuss the specifics of your situation. Don’t fall for ERC promoters who try to limit communication to email or text messages. The complexity of ERC eligibility requires real-time interaction. If they can’t engage in direct discussion, it’s a red flag.
Remember, legitimate consultants will welcome open dialogue about your circumstances and how the ERC could benefit you. They’ll explain the intricate details, answer any questions you might have, and never rush you into a decision. Beware of those avoiding phone calls or meetings – this might indicate fraudulent intentions.
3. Make Sure the Email Addresses Match the Individual and Company Names
After speaking directly with potential ERC service providers, it’s time to delve deeper into their digital identity.
One crucial step is ensuring the email addresses match the names of both individuals and companies you’re dealing with. Be wary if there’s a discrepancy between the company or representative’s name and their email address.
Don’t trust ERC filers using personal accounts like Gmail or Hotmail. If they aren’t investing in a professional domain, they might not be as legitimate as they seem.
This thorough analysis can help safeguard against scams and lead to genuine services that are truly beneficial for your business. Remember, diligence in these areas isn’t just recommended; it’s a must for your financial safety during these challenging times.
4. Don’t Work with a Company That Inflates Claims
Steer clear of firms that exaggerate claims to boost their fees. Some may inflate the wages of your qualifying employees or falsify payroll records to increase both your Employee Retention Credit (ERC) claim and their contingent fees. Remember, you’re always responsible for the information on your tax returns.
Working with a company that encourages inaccurate filings is a dangerous game. If caught, you’ll have to repay the credit, along with potential penalties and interest. It’s not worth risking your financial stability and reputation. Instead, seek out reputable ERC tax professionals who base their fee on the legitimate amount of your ERC claim.
Don’t fall victim to unscrupulous tactics; be vigilant in ensuring all figures are accurate and verifiable in your ERC application process.
5. Get Your Agreement in Writing
You should always insist on getting any service agreements in writing before proceeding with a company that’s assisting you with your Employee Retention Credit claim. A written agreement serves as a legal proof of the terms and conditions of your partnership, providing clarity and security. If they’re unwilling to offer a contract, consider it a red flag indicating potential fraudulence.
Consider these key elements when reviewing your written agreement:
- Service details: It should clearly outline what services will be provided.
- Fee structure: The charges for their services must be transparent and reasonable.
- Provisions for dispute resolution: Look for clauses that address how disputes will be resolved if they arise.
6. Only Work with Companies That Offer Audit Protection
It’s crucial to partner with companies that provide audit protection when dealing with employee tax credits. This isn’t just about ensuring your Employee Retention Credit (ERC) claim is valid; it’s also about safeguarding your business from potential fallout if the IRS decides to review your case. Companies that offer audit protection show they stand behind their work and will support you during an audit process.
Avoid ERC promoters who refuse to provide this security. They might not have confidence in the quality of their work or may be planning a short-lived operation. Don’t expose your business to unnecessary risk by partnering with such entities.
Always prioritize working with reputable companies offering audit protection, showing a commitment to long-term client support and high-quality service delivery.
7. Do Your Research
While it’s crucial to work with companies that offer audit protection when dealing with the ERC, you shouldn’t stop there. You’ve got to do your homework too.
Dive deep into researching any company you’re considering working with. Look for reviews or complaints on the Better Business Bureau website. Ask probing questions about their experience; how long they’ve been in business? How many filings have they processed? Gauge their commitment by understanding if they support other types of tax credits besides ERC.
8. When in Doubt, Contact the IRS
Should there be any doubt or uncertainty about the entity contacting you, reaching out directly to the IRS is always a smart move. It’s important to remember that official correspondence from this agency often arrives via mail. Be wary of unsolicited emails, texts, or letters with suspicious QR codes claiming to be from them.
You can mitigate the risk of falling for an ERC scam by verifying information independently with the IRS. Don’t hesitate to contact them if something feels off—you’re better safe than sorry. Remember, it’s your responsibility to ensure the legitimacy of any claims made on your behalf.
If you suspect fraudulent activity, report it immediately to both the IRS and Treasury Inspector General for Tax Administration (TIGTA). Stay vigilant and informed—it’s your best defense against scams.
How Can You Be Sure You’re Filing for Your ERC With Confidence?
You can rest assured you’re filing your ERC claim with confidence by taking precautions:
First, research the reputation of the ERTC tax expert firm and verify their compliance measures.
Second, ensure they offer robust support throughout the process. Don’t be swayed by firms that guarantee eligibility or high refunds without proper review.
Instead, seek out a company which prioritizes compliance and provides comprehensive client support.
Here are some key factors to consider:
- Speed and Efficiency: A reputable firm should have an efficient system in place.
- Compliance Measures: Look for companies that prioritize legal compliance. Do they use a compliance portal to protect sensitive information and ensure all critical items are captured.
- Support: The firm should provide ongoing support throughout the filing process. You should ideally be working with a dedicated client support specialist who will assist you from start to finish.
Remember, if an offer seems too good to be true, it probably is. Avoid falling victim to scams by doing thorough research and seeking professional ERC advice when needed. And finally, don’t hesitate to report any suspicious activity to the IRS or Treasury Inspector General for Tax Administration (TIGTA).
Conclusion
While the ERC is indeed a legitimate aid for businesses affected by COVID-19, you must stay vigilant against scams.
Understand the eligibility criteria, be skeptical of promises without thorough review, and always research potential ERC funding companies.
Remember to report any suspicious activity.
For further information check out our post – IRS halts ERTC processing temporarily to investigate fraudulent claims.
Armed with knowledge and caution, you can confidently apply for your rightful ERC.
