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Employee Retention Credit Scams and How to Spot Them

The IRS is reminding businesses and tax-exempt groups to watch out for telltale signs of misleading claims about the Employee Retention Credit (ERC), sometimes called the Employee Retention Tax Credit or ERTC. The IRS and tax professionals continue to see aggressive broadcast advertising, direct mail solicitations and online promotions involving the ERC. While the credit is real, aggressive promoters are misrepresenting and exaggerating who can qualify for the credit.

The IRS has issued many warnings about ERC schemes from third party promoters that charge large upfront fees or a fee based on the amount of the refund. And the promoters may not tell taxpayers that wage deductions claimed on the business’ federal income tax return must be reduced by the amount of the credit. The reduction of wage increases the business’ profits and creates additional income to the business owner for LLCs, Partnerships and S-Corporations, who then must file amended returns.

Businesses, tax-exempt organizations and others thinking about applying for the ERC need to carefully review the official requirements for this credit before they claim it.

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