LAFAYETTE, La. (KLFY) — The Better Business Bureau and the IRS warned about scams revolving around the employee retention credit, a tax credit for businesses that continued paying employees during the COVID-19 shutdowns or had a significant income decline during the eligibility period.

Now, the IRS is ordering a stop to new employee retention credit processing after a surge in questionable claims, concerns from tax professionals and aggressive marketing to ineligible applicants.

News 10 spoke with Chris Babin of the BBB of Acadiana about what this means for businesses.

“Following the pandemic, the IRS released the employee retention credit for businesses. It’s a credit towards businesses that were able to keep their operations. There’s a lot of different parameters you have to meet but we know scammers have followed that and started tricking companies thinking that they might be eligible,” said Babin.

The IRS issued a moratorium on new employee retention credit processing, and it lasts through at least the end of 2023 on processing new claims for the program to protect small business owners from scams.

“They’re able to get money from the IRS back to their company if they meet the parameters. The problem is scammers have followed those headlines. They’ve started contacting companies telling them that they may be eligible they just need a fee up front to help process their application and that’s led to a lot of fraudulent applications being turned in and scammers stealing businesses’ money,” said Babin.

The IRS says payouts for claims already filed will continue during the moratorium period but at least at a slower pace because of the detailed reviews. The IRS may also seek additional documentation from the taxpayer to ensure it’s a legitimate claim.

“The employee retention credit is an actual program. The problem is scammers have been pretending as though they’re able to help your business apply. They can get your application through sooner. They can get you more money back than you would traditionally get through the application and they’re causing problems with the IRS but also stealing businesses’ money,” said Babin.

The BBB has tips to help business owners spot a scam:

• Don’t believe marketing materials guarantee you’ll qualify for a tax credit.  Anyone who makes guarantees without knowing anything about your business is likely up to no good.
•  Think twice about promises of huge refunds. Scammers use the same tactics for many different cons. Tax credit schemes are no exception.
• Don’t pay to get money.  Watch out for companies or individuals that charge you fees based on high and optimistic percentages of recovered taxes.
• Get to know the rules about ERC or other tax credits.  Always do your research through a reputable source.
• Be careful with your personally identifiable information. Never give sensitive information to someone you don’t know and trust.

If you have a scam you’d like me to investigate, feel free to send me an email at smasters@klfy.com.

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