Wednesday Wisdom From Wouch Maloney - CPA Firm

Employee Retention Credit Scam

Over the last few years, we have helped numerous clients receive Employee Retention Credits (ERC). The ERC was a welcome benefit for employers during the pandemic. Unfortunately, we have heard that some of you have been contacted by individuals promoting improper and fraudulent tax credits. The IRS became aware of the Employee Retention Credit scam and how third parties are charging large fees for credits that employers are not eligible to receive.

What We Know

On October 19, 2022, the IRS published a news release with the following details:

“The Internal Revenue Service today warned employers to be wary of third parties who are advising them to claim the Employee Retention Credit (ERC) when they may not qualify. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit.

These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund and may not inform taxpayers 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.”

Sound Too Good To Be True?

The IRS encourages businesses to be cautious of advertised schemes and direct solicitations promising tax savings that are too good to be true.


As always, if you have a questions concerning ERC credits, or any other questions regarding your tax returns, please reach out to us to discuss.

DISCLAIMER: The WM Daily Update, WM Wednesday Wisdom, Newsletters, COVID-19 Business Resources, COVID-19 Client News Alerts and other related communications are intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

To read entire update from the IRS regarding the Employee Retention Credit scam, please click here.

For more articles regarding Employee Retention Credit, please click here.