Employee Retention Tax Credit (ERTC) Scams and Fraud

Aug 11, 2023 | Tax & Accounting

The rise of “ERTC Mills” has caused widespread confusion and increased the potential for fraud. These entities exploit the system, intensifying the risk of deception. While these mills charge for basic clerical duties, their agreements often specify that they don’t offer audit services. However, they might assist in finding support if an audit results from their ERTC-related work. Many businesses find themselves misled by these ERTC mills, putting their operations in peril.

For tax professionals dedicated to offering their clients sound advice, ERTC mills present considerable challenges. Feedback from our clients indicates that these mills dangle enticing financial promises, making it hard for genuine tax consultants to compete with such attractive propositions.

The complications stemming from ERTC mills extend beyond deceptive claims. Several individuals have already expended the funds, oblivious to their ineligibility under the ERTC, eventually discovering they were defrauded. Further complicating matters, the fees handed over to these mills cannot be retrieved.

In addition, improperly claiming the ERTC can lead to civil liability for back taxes, interest, and penalties. It can also lead to criminal prosecution in some circumstances. IRS Criminal Investigations actively target taxpayers whose returns exhibit red flags for ERTC fraud. If an IRS investigation uncovers evidence of intentional ERTC fraud, this can lead to prosecution for tax fraud and other federal tax crimes.

Should you have any questions regarding the ERTC or if you’ve been approached by an ERTC mill, please reach out to TWHC today.

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