Fraud Fueled by Aggressive Marketing to Ineligible Applicants

October 2023

The May 2023 issue of the Blair Bulletin offered a “heads-up” to business owners and managers regarding the Employee Retention Credit. The caution was for taxpayers to be aware of aggressive pitches from scammers who promote large refunds related to the Employee Retention Credit (ERC). The warning follows blatant attempts by promoters to con ineligible people to claim the credit.

As we reported, the IRS chimed in on abuses by third-party “advisors” for blasting ads on radio and the internet hyping ERC refunds. The agency’s concern was underscored by including ERC fraudsters in its annual Dirty Dozen summary.

In mid-September, the IRS announced an immediate halt to processing new ERC claims at least until the end of 2023. IRS Commissioner Danny Werfel ordered the immediate moratorium, following growing concerns inside the tax agency, from tax professionals as well as media reports that a substantial share of new claims from the aging program are ineligible and increasingly putting businesses at financial risk by being pressured and scammed by aggressive promoters and marketing.

The IRS continues to work previously filed ERC claims received prior to the moratorium but emphasizes that payouts for these claims will be at a slower pace due to the detailed compliance reviews.

IRS Commissioner Danny Werfel said, “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in. For those people being pressured by promoters to apply for the Employee Retention Credit, I urge them to immediately pause and review their situation while we look to add new protections and safeguards to stop bad claims from ever coming in.

In the meantime, businesses should seek out a trusted tax professional who actually understands the complex ERC rules, not a promoter or marketer hustling to get a hefty contingency fee. Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution. The moratorium will help protect taxpayers by adding a new safety net onto this program to focus on fraudulent claims and scammers taking advantage of honest taxpayers.”