The IRS wants to warn people and businesses about the new spotlight taking number one on the Dirty Dozen tax scam list, the Employee Retention Credit (ERC). There have been attempts to scam taxpayers by conning ineligible people and businesses to claim the credit. Be wary of any ERC promotions on the radio or internet boasting refunds. These promotions are typically based on inaccurate information related to eligibility for the credit.
The IRS Commissioner Danny Werfel wants to remind everyone that “There are very specific guidelines around these pandemic-era credits; they are not available to just anyone. Businesses need to think twice before filing a claim for these credits. We urge honest taxpayers not to be caught up in these schemes.” The IRS Criminal Investigation Division is on the lookout for promoters of fraudulent claims for credits.
Enforcement action involving the ERC claims is also stepping up from the IRS. Their Small Business/Self-Employed division thoroughly trained suitors examining these claims. It is recommended that businesses listen to the advice of their trusted tax professionals and that taxpayers are always responsible for all of the information reported on their tax returns.
When the ERC is claimed properly, it is a refundable tax credit designed for businesses that continued to pay employees during a period of time they were shut down due to the COVID-19 pandemic or had a significant decline in gross receipts during the eligibility periods. The ERC is not available to individuals.
To properly claim the ERC, eligible taxpayers must have an original or amended employment tax return for qualified wages paid between March 12, 2020, and December 31, 2021. To be eligible employers must have:
- Sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel or group meetings because of COVID-19 during 2020 or the first three quarters of 2021,
- Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021, or
- Qualified as a recovery startup business for the third or fourth quarters of 2021.
Employers should always report scam and scheme attempts to the IRS at phishing@irs.gov.
For more information regarding tax fraud prevention, head to our website at https://tax.colorado.gov/tax-fraud-prevention for details on tax scam alerts, personal and business identity theft, reporting tax fraud and more.