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IRS Warns Employers About Third Parties Promoting ERC Claims

BY: Jyme Mariani, Esq. | 10/20/22

The IRS warned employers to be wary of third parties advising them to claim the employee retention credit (ERC) when the employer may not qualify to take the credit [IR-2022-183, 10-19-22].

Be Wary of Advertising Schemes

While reputable companies may help employers properly claim the ERC, the IRS warned of third parties that are not using correct criteria for taxpayer eligibility and computation of the credit. The IRS said these third parties also may charge employers large fees upfront or a fee contingent on the amount of the refund. The third parties may not inform employers that wage deductions claimed on their federal income tax return must be reduced by the amount of the credit.

The IRS advised businesses “to be cautious of advertised schemes and direct solicitations promising tax savings that are too good to be true.” Businesses are always responsible for the information reported on their tax returns. Improperly claiming the ERC could result in employers being required to repay the credit as well as paying penalties and interest.

Reporting Bad Actors

The IRS requested that employers report tax-related illegal activities relating to ERC claims by submitting Form 3949-A, Information Referral. Employers can print the form, fill it out, and mail the completed form to: Internal Revenue Service, P.O. Box 3801, Ogden, UT 84409.

Employers should also report instances of fraud and IRS-related phishing attempts to the Treasury Inspector General for Tax Administration at 800-366-4484.

To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!


Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Senior Manager of Payroll Information Resources for the APA.