Employee Retention Credit Scam Alert

On October 19, 2022, the IRS issued a press release (IR-2022-183) regarding the Employee Retention Credit (ERC). It warned employers to watch out for third parties advising them to claim the ERC, when they may not actually qualify for the credit by disregarding the taxpayer’s eligibility or proper calculation of the credit.

According to the IRS, these third parties often charge large upfront fees or a fee that is contingent on the amount of the refund, without explaining that wage deductions claimed on the business’ federal income tax return must be reduced by the amount of the credit.

If the business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credit, the business should file an amended income tax return to correct any overstated wage deduction.

The IRS encourages taxpayers to be on guard and not fall prey to advertised schemes and direct solicitations promising tax savings that are “too good to be true.” Taxpayers are always responsible for the information reported on their tax returns and improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.