Fast Money Does Not Last
A wise man once said, “Fool me once, shame on you; fool me twice, shame on me.” Whoever this so-called wise man was, he had never encountered the IRS. If he had, the corrected quote would be something like this: “Fool the IRS once, go straight to jail.” When it comes to trying to defraud the Internal Revenue Service, just don’t. At worse you end up in prison, at best, you end up looking over your shoulder for the rest of your life.
As we get closer to the April 18, 2023 filing deadline, and the economy gets worse, it can become more tempting to resort to illegal measures to get money. This is exactly what is happening right before us with fraudulent customers luring unscrupulous consumers into obtaining fraudulent Employee Retention Credit (ERC).
Because of the ease of abuse of the ERC, The IRS issued a warning urging people to carefully review the ERC guidelines before trying to claim the credit as promoters continue pushing ineligible people to file. On the internet and television, you cannot go a few minutes without some kind of advertisement on how the ERC can easily get a small business owner “up to $26,000 in free government money.”
Technically, the ERC is a legitimate government program. The ERC is a refundable tax credit designed for businesses that continued paying employees while shut down due to the COVID-19 pandemic or who had significant declines in gross receipts from March 13, 2020, to Dec. 31, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period within those dates.
The requirements to receive the ERC are as follows:
• Sustained a full or partial suspension of operations limiting commerce, travel, or group meetings due to COVID-19 and orders from an appropriate governmental authority, or
• experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021, or
• Qualified in the third or fourth quarters of 2021 as a recovery startup business.
Online promoters are eager to get as many people to sign up; here are some red flags to look for:
• Companies charging fees that are high and based on a percentage of the ERC credit.
• Companies that tell you they can get you an ERC without looking into the details of whether you qualify.
• Generally advertisements that sound too good to be true.
If you are a business owner, please be cautious in fielding solicitations for the ERC credit. If you are not eligible, a promoter may have you file a false amended tax return. Improperly claiming the ERC could result in taxpayers being criminally prosecuted and being required to repay the credit along with penalties and interest.
If you have filed an unauthorized ERC request, please reach out to the Attorneys at The Wilson Firm. We can help you mitigate the financial cost and criminal exposure.