Tim’s Tax News on the Tenth – August 2023

On July 26, 2023, The IRS announced that the IRS making substantial progress in the ongoing work related to the Employee Retention Credit claims (“ERC”), Commissioner Danny Werfel said the agency has entered a new phase of increasing scrutiny on dubious submissions while renewing consumer warnings against aggressive marketing. He further said the IRS has shifted efforts after successfully clearing the backlog of valid ERC claims. Now, the agency is intensifying compliance work and putting in place additional procedures to deal with fraud in the program.

Werfel stated as a result of aggressive ERC claims that the IRS has increased audit and criminal investigation work on these claims, both on the promoters as well as those businesses filing dubious claims. He noted that “the further we get from the pandemic, we believe the percentage of legitimate claims coming in is declining,” he added “instead, we continue to see more and more questionable claims coming in following the onslaught of misleading marketing from promoters pushing businesses to apply. To address this, the IRS continues to intensify our compliance work in this area.”



The Employee Retention Credit, also sometimes called the Employee Retention Tax Credit or ERTC, is a tax credit enacted to help businesses during the pandemic that was subsequently amended three times by Congress. Many businesses legitimately apply for the credit, but the period of eligibility for the credit for affected businesses is very limited, covering only between March 13, 2020, and Dec. 31, 2021. Under the current law, businesses can typically continue to file claims for the credit until April 15, 2025. 

With more than 2.5 million claims coming in since the program was enacted IRS claims processing slowed due to the complexity of the amended returns. The IRS has made substantial progress on these claims this year, with 99 percent of claims approximately three months old as of mid-July. The additional effort has been critical in helping legitimate businesses receive the money they can claim legally under the law. 

However, the IRS has growing concerns about scams and potential fraud within the ERC program given the troubling increase in false and misleading public advertisements and scams taking advantage of taxpayers.

Warning signs of aggressive ERC marketing

There are important tips that people should be wary of involving the Employee Retention Credit. Warning signs to watch out for include:

• Unsolicited calls or advertisements mentioning an “easy application process.”
• Statements that the promoter or company can determine ERC eligibility within minutes.
• Large upfront fees to claim the credit.
• Fees based on a percentage of the refund amount of Employee Retention Credit claimed. This is a similar warning sign for average taxpayers, who should always avoid a tax preparer basing their fee on the size of the refund.
• Preparers refusing to sign the ERC return being filed by the business, exposing just the taxpayer claiming the credit to risk.
• Aggressive claims from the promoter that the business receiving the solicitation qualifies before any discussion of the group's tax situation. In reality, the Employee Retention Credit is a complex credit that requires careful review before applying.
• The IRS also sees wildly aggressive suggestions from marketers urging businesses to submit the claim because there is nothing to lose. In reality, those improperly receiving the credit could have to repay the credit – along with substantial interest and penalties.

If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 30 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.

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