Exactly two weeks away from Tax Day, we’re approaching the end of the fiscal year. Unfortunately, the end of the tax filing season presents scammers with ample opportunities for theft. Despite improved prosecution by enforcement agencies in 2023, the Internal Revenue Service (IRS) is warning taxpayers to be on high alert for aggressive and convincing fraud schemes in the coming weeks.
Each year, the IRS puts together a report called the “Dirty Dozen.” This report warns taxpayers of some of the most frequent and trendy scams to watch out for during the current filing season.
One scam is especially prevalent and targets business owners this tax season—false Employee Retention Credit (ERC) claims.
The ERC is a refundable tax credit recently issued by the IRS. It’s available to businesses that continued to pay employees while shut down due to COVID-19, or had significant declines in gross receipts from March 13, 2020, through Dec. 31, 2021.
ERC claims have had the IRS on high alert in 2023, and it’s no wonder why. Not only are these scams being attempted by con artists through various phishing, smishing, and vishing attempts—they have also been broadcasted by misinformed promoters claiming to be able to help ineligible business owners receive the credit.
While many eligible employers claimed (and have already received) the ERC, some third parties continue to widely advertise their services, targeting ineligible taxpayers. These ERC claims are unique in the sense that they are paid advertisements. This, mixed with their increased prevalence on websites and on the airwaves, lend a dangerous air of legitimacy to abusive claims for a refund.
While there are certainly legitimate companies that have successfully advised small businesses in ERCs, some of these promoters have not properly explained the qualifications, or have encouraged unqualified businesses to file.
The IRS reminds business owners to rely on their trusted tax professional in determining eligibility for tax credits.