The Covid-19 pandemic ushered in government benefit programs aimed at relieving the economic burdens the pandemic and the resulting lockdowns caused to individuals and businesses. Among those benefits was the Employee Retention Credit (ERC). Individuals and employers are being warned that making false claims for an ERC credit will and has resulted in criminal charges.
The ERC program was created to help small businesses reduce the employment tax they owed as a set-off for partial or full suspension of their business due to Covid-19. The credit is tied to employee wages paid by the business. The ERC program is complex and requires that a business’ eligibility fall within certain guidelines.
The program has been plagued with fraud and scams. Small businesses and individuals have fraudulently claimed this credit while others have fallen prey, wittingly or unwittingly, to unscrupulous enterprises who aggressively advertise as “advisors” who will assist employers, sole proprietors, and independent contractors to claim the ERC. In other cases, individuals have made false claims for nonexistent businesses. According to the IRS, thousands of ERC claims have been referred for audit and 252 criminal investigations into possible fraudulent ERC claims have been initiated.