Now It’s the Employee Retention Credit Scam

In case you’re keeping count, this is my sixth blog in 2022 about scams being perpetrated on vulnerable taxpayers to steal their money and financial information. From phishing to ransomware to IRS impersonator calls, scammers adapt to any method that works. Scammers also take advantage of current events where they can cash in, like those involving donations, like natural disasters, and tax programs, like the Employer Retention Credit (ERC). 

The ERC is a refundable tax credit for eligible businesses who continued paying employees while shutdown or suffered significant declines in gross receipts due to the COVID-19 pandemic. Eligible business taxpayers can claim the ERC on their federal employment tax return, IRS Form 941.

Scammers jumped on this money making opportunity, contacting employers by email, phone, and text to “help” them get the ERC, even if the employer doesn’t qualify. The scam works by charging an upfront fee, whether or not the employer gets the ERC. Businesses should be wary of advertised schemes to file for the ERC and recognize direct solicitations promising tax savings that are too good to be true.

To be eligible for the ERC, employers must have:

  1. Fully or partially suspended operations due to orders from a government authority that limited business activity, travel, or meetings due to COVID-19 during 2020 or the first three quarters of 2021, 
  2. Experienced a significant decline in gross receipts during 2020 or the first three quarters of 2021, OR
  3. Qualified as a recovery start-up business for the third or fourth quarters of 2021.

Also, for any quarterly payroll reporting period, eligible employers cannot claim the ERC on wages that were reported as payroll costs for Payroll Protection Program (PPP) loan forgiveness or that were used to claim certain other tax credits.

Falling for an ERC scam can be very expensive. Taxpayers are always responsible for the information reported on their income tax return. Improperly claiming the ERC could result in repaying the credit, plus penalties and interest. And that’s on top of the scammer’s fee.

Scammers and unscrupulous third parties can be persuasive. It’s their job. So don’t feel bad or cast blame if you or a business owner you know fell for the ERC scam. Good news – it’s not too late to fix the situation. Employers who filed for the ERC in error, intentionally or under the advice of an unscrupulous third party or scammer, should file amended employment tax returns for the applicable reporting periods.

Want to know more about the Employee Retention Credit and see if your business is eligible? It’s all right here on the IRS website –