ERC Fraud Prevention & Resources

Learn What Business Owners Need to Know to Avoid Allegations of ERC Fraud

The Internal Revenue Service (IRS) and other federal agencies are targeting businesses and their owners for employee retention credit (ERC) fraud. Allegations of ERC fraud can lead to substantial penalties—including criminal penalties in some cases. Here are some tips for avoiding allegations of ERC fraud, plus some tips for what to do if your business becomes the target of an ERC fraud investigation.

Tips for Avoiding ERC Fraud Allegations

1. Confirm Your Business’ Eligibility for the Employee Retention Credit

Before filing for the ERC, you should carefully confirm your business’ eligibility. The ERC is only available for the 2020 and 2021 tax years (eligible businesses can still retroactively claim the credit), and it is only available to businesses that meet one of three very specific eligibility criteria.

2. Apply the Right Set of Rules to Calculate the ERC Correctly

When claiming the ERC, businesses also need to be very careful to calculate the credit correctly. There are different rules for calculating the credit for 2020 and 2021. Even if a business is eligible for the credit, it can still face ERC fraud allegations if it exceeds the maximum credit allowed.

3. Avoid Working with Third-Party ERC Filers (or “ERC Mills”)

The IRS has issued multiple notices warning businesses to avoid working with third-party ERC filers. It refers to these third parties as “ERC mills” and notes that they are encouraging many businesses to claim the credit even when they don’t qualify.

4. Be Proactive if Your Business Has Made a Mistake

If your business has improperly claimed the ERC, it may still be possible to correct the mistake before it leads to civil or criminal allegations. Depending on the circumstances at hand, this may involve submitting an amended filing, submitting a voluntary disclosure, or pursuing another solution.

Tips for Responding to Allegations of ERC Fraud

What if it is already too late to avoid allegations of ERC fraud? If your business becomes the target of a federal ERC fraud audit or investigation, you should:

  • Avoid voluntarily providing (or allowing your employees to provide) any information to the IRS or any other federal agency;
  • Engage experienced defense counsel to respond to the accusations on your business’s behalf;
  • If you receive an ERC subpoena, note the deadline and notify your defense counsel immediately;
  • Conduct an internal (and attorney-client privileged) audit to assess the validity of the accusations; and,
  • Formulate and execute a targeted defense strategy based on the facts and circumstances at hand.

Contact an IRS Criminal Tax Lawyer at Thorn Law Group for More Information

If you have questions or concerns about ERC fraud, we invite you to contact an IRS criminal tax lawyer for more information. We help business owners make informed decisions, and we defend businesses and their owners against civil and criminal allegations when necessary. To schedule a confidential initial consultation with a federal tax lawyer, call Kevin E. Thorn, Managing Partner of Thorn Law Group at 202-349-4033 or tell us how we can reach you online today.

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