10 Tips to Avoid Employee Retention Tax Credit Scams

10 Tips to Avoid Employee Retention Tax Credit Scams

Many business owners are apprehensive about applying for the Employee Retention Tax Credit (ERTC). So why aren’t more business owners taking advantage of a tax refund worth up to $26,000 per W2 employee? There are a few reasons. Many people are unaware that the ERTC is still available, while others don’t know how to apply or assume they don’t qualify. But, a major discouragement for business owners is ERTC scams. 

The Lake Law Firm offers legitimate ERTC filing services, and we want to see businesses recover the money they are entitled to. This article will outline essential signs to help business owners avoid Employee Retention Tax Credit scams. 

The IRS Has Warned Business Owners About ERTC Scams

In October 2022, the IRS released a statement informing business owners to beware of third parties advertising the Employee Retention Tax Credit. These third parties tell businesses they qualify even when they don’t. Business owners who fall prey to ERTC schemes may find themselves in trouble. The IRS cautions that taxpayers are responsible for the information reported on their tax returns. If a business owner falsely claims the ERTC, they may have to repay the credit with penalties and interest.

The IRS reissued this statement in March 2023, following a rise in third parties promoting the ERTC to ineligible people. Submitting a false claim, even unknowingly, can result in setbacks for businesses. 

Steps to Avoid Fraudulent ERTC Filing Services 

The Employee Retention Tax Credit assists eligible businesses in recovering from the economic stresses of the COVID-19 pandemic. But scammers are using this refund to exploit business owners. Here are ten tips to steer clear of Employee Retention Tax Credit scams: 

  • Ask About Upfront Fees 

Anytime you use a third party to apply for the ERTC, there will be a charge. However, a red flag is if a company requires you to pay a large upfront fee before you receive your refund. Some scammers will charge you in advance, but there is no guarantee that you will get a check from the IRS. 

A contingency fee is a more reliable and safe payment structure. With a contingency fee, the filing service only gets a percentage of the IRS check once you receive it. That means the business only gets paid if they successfully recover your refund. 

  • Understand the Employee Retention Tax Credit 

The IRS urges business owners to review the guidelines for the ERTC. Learning about ERTC qualifications and exemptions will make you more likely to spot inaccurate information from scammers. 

  • Exercise Caution with Solicitors 

Scrutinize direct solicitations such as phone calls, emails, or text messages. Fraudulent ERTC companies may use telemarketers to reach people. Be mindful that your personal details and financial statements are sensitive information, so don’t give them out to just anyone. 

  • Inquire About Their Audit Defense 

You should know if a company offers audit defense services. Legitimate ERTC filing services submit factual and truthful claims, which reduces the risk of an IRS audit. That said, a valid company will still provide an audit defense if it does occur. ERTC scammers usually don’t have a system in place in the event of an IRS audit. 

  • See How Old the Company Is

Several false ERTC filing services have only opened recently to capitalize on the Employee Retention Tax Credit. Consider alternative options if you find out that the company has only been around for a short time. 

Working with a seasoned and well-established company is ideal. 

  • Ask About the Company’s Track Record

Although countless companies are jumping on the ERTC bandwagon, that does not mean they have successfully helped anyone recover their refund. When considering ERTC assistance, don’t shy away from asking the advisor how many businesses have benefited from their services and proof. 

  • Review Documentation 

A reputable advisor should ask the business owner to review the claim and supporting documentation to verify all statements are correct. If an ERTC service does not offer this information before submitting the claim, request it. A company should provide documented evidence that you are eligible for the ERTC and why. Understanding how the company concluded that your business qualifies is crucial.  

  • Verify the Company’s Timeframe 

A company that has assisted businesses in actually recovering their ERTC refund should be able to give you a realistic timeframe. Inquire about processing and turnaround time before committing to an advisor. A genuine company should be straightforward about approximately how long recovering your ERTC refund might take and any possible delays. 

  • Report Obvious Scams to the IRS

A common scam involves individuals posing as IRS agents or other government officials. Deceptive companies may send phishing emails with clickable links or forms to steal your information. You can report phishing emails to the IRS at or by calling 800-829-1040. 

  • Be Mindful of the Company’s Behavior

Note how the company interacts with you. Be wary of companies that pressure you into quickly signing a contract or that make false promises that guarantee your business qualifies before you even fill out a questionnaire. 

The Lake Law Firm Can Help You Safely Claim the ERTC

Remember that you can file for the Employee Retention Tax Credit on your own. However, partnering with a credible company improves your chances of submitting a correct claim. While you want to avoid scams, enlisting the help of a verified ERTC group can make the ERTC process easy and safe. 

As a law firm, our ERTC advisors and attorneys follow ethical codes when calculating and submitting claims. We have helped numerous businesses recover their ERTC refunds and may be able to do the same for you. Contact The Lake Law Firm today to see if your business is eligible for the ERTC.