background

What are Employee Retention Credit (ERC) Scams, and How You Can Avoid Them

Jul 19, 2023

Introduction

Employee Retention Credit (ERC) scams have become increasingly prevalent as businesses navigate the complexities of the COVID-19 pandemic. These scams target unsuspecting employers who are seeking financial relief through the ERC program. It is crucial for businesses to be aware of these scams and take proactive measures to avoid falling victim to them.

Understanding the Employee Retention Credit (ERC)

The Employee Retention Credit is a valuable tax credit introduced by the U.S. government to provide financial assistance to eligible employers who have experienced significant revenue losses due to the pandemic. The credit is designed to incentivize businesses to retain their employees and continue operations during these challenging times.

Unfortunately, scammers have seized this opportunity to exploit businesses by offering fraudulent services related to the ERC. These scams can take various forms, including phishing emails, fake websites, or individuals posing as government officials or tax professionals.

How to Identify ERC Scams

Recognizing ERC scams is crucial to protecting your business from potential financial loss. Here are some warning signs to watch out for:

  • Unsolicited communication: Be cautious of unsolicited emails, phone calls, or text messages claiming to offer ERC assistance.
  • Requests for personal information: Legitimate ERC programs will not ask for sensitive information such as social security numbers or bank account details upfront.
  • High-pressure tactics: Scammers often use urgency and fear to pressure businesses into making hasty decisions. Be wary of anyone demanding immediate action.
  • Poorly designed websites or emails: Pay attention to the quality of the communication. Misspellings, grammatical errors, and unprofessional designs can be red flags.

Protecting Your Business from ERC Scams

Prevention is key when it comes to avoiding ERC scams. Here are some essential steps to safeguard your business:

  1. Educate your team: Train your employees to recognize and report potential scams. Encourage an open dialogue about cybersecurity and provide resources for them to stay informed.
  2. Verify before sharing information: Before sharing any sensitive information, verify the legitimacy of the organization or individual requesting it. Contact the IRS or consult with a trusted tax professional to confirm the validity of the request.
  3. Stay updated with official sources: Rely on trusted sources such as the IRS website or reputable news outlets for the most accurate and up-to-date information regarding the ERC program.
  4. Implement robust cybersecurity measures: Ensure your business has strong firewalls, antivirus software, and encryption protocols in place to protect against phishing attempts and other cyber threats.

Reporting ERC Scams

If you encounter an ERC scam or suspect fraudulent activity, it is crucial to report it promptly. By reporting scams, you help authorities take action and protect other businesses from falling victim to the same schemes.

Contact the IRS or the Federal Trade Commission (FTC) to report any ERC scams or fraudulent activities. Additionally, inform your local law enforcement agency and share any relevant information or evidence you may have.

Conclusion

As businesses strive to recover from the economic impact of the pandemic, it is essential to remain vigilant against ERC scams. By staying informed, educating your team, and implementing robust cybersecurity measures, you can protect your business from falling victim to these fraudulent schemes. Remember, if something seems too good to be true or feels suspicious, it's better to err on the side of caution.