How to Spot and Stop ERTC Fraud Before It Happens

Protect your company from Employee Retention Tax Credit fraud risks with actionable steps to detect, prevent, and respond to fraudulent activities quickly and efficiently.

How to Spot and Stop ERTC Fraud Before It Happens

Fake companies often market themselves as being able to assist business owners in claiming Employee Retention Tax Credit (ERTC). These companies can promise quick and easy solutions for obtaining credit. Still, they are often fraudsters who exploit business owners' need for quick investment returns. Luckily, businesses can take steps to protect themselves from Employee Retention Credit fraud, and that is what this article will teach you.

Employee Retention Tax Credit (ERTC) Purpose

Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, established the Employee Retention Tax Credit (ERTC) to assist employers affected by the coronavirus pandemic. The ERTC is a refundable tax credit intended to encourage recovery startup businesses and other companies to keep their employees on the payroll during a recession.

The refundable tax credit equals 50% of qualified wages paid during the tax year and is available for payments up to $10,000 per employee per year. It applies to wages earned between March 13, 2020, and December 31, 2020 (with a few exceptions). A business qualifies if there has been a significant decline in gross receipts of higher than 50% from the same quarter in 2019.

Employers must also have fewer than 500 full-time employees to qualify for the tax credits. In addition, under the Relief Act, employers are eligible if they already received Paycheck Protection Program (PPP) loans.

Who Can Help You Claim ERTC?

Legitimate sources of assistance for claiming the ERTC can come from various professionals with considerable knowledge of tax and financial legislation. Here are a few:

  1. Certified Public Accountants (CPAs): These financial experts are knowledgeable in tax laws and can help businesses navigate the complexities of ERTC.
  2. Tax Attorneys: With a deep understanding of tax legislation, these professionals can provide legal advice on the claiming process and ensure all practices are legal and above board.
  3. ERTC Specialists: These experts focus specifically on Employee Retention Tax Credits. They are up-to-date on the latest ERTC guidelines and can help businesses maximize their claims while adhering to the rules.
  4. Business Consultants: These professionals often have broad knowledge of business operations and can enlighten businesses on the benefits of ERTC and how to claim it.
  5. Financial Advisors: These advisors can help businesses strategize how best to utilize ERTC to boost financial health and stability.

Remember, the key is to ensure that the professional you choose to work with has a solid understanding of ERTC and is honest and transparent about their services and fees.

What Are the Common Types Of ERC Fraud?

• False Advertising

Fraudsters may advertise false services that promise quick and easy access to the ERC refunds when exploiting vulnerable business owners for their gain.

• Fake Companies

Fraudulent companies often masquerade as legitimate businesses and offer assistance with ERTC claims, but in reality, they are just out to scam businesses out of their hard-earned money.

• Phishing

Fraudsters may also use phishing techniques to try and get employers' personal information or access to bank accounts.

• Unauthorized Access

Fraudsters may also gain access to business accounts without permission and use the information they find for malicious purposes.

• Data Manipulation

Some fraudsters may attempt to manipulate data related to Employee Retention Credit to maximize their profits rather than help employers.

Red Flags Of Employee Retention Credit Fraud

There are several red flags that businesses should watch out for when attempting to detect Employee Retention Credit (ERC) fraud. These include:

• Cold calls or emails from unknown companies offering to help secure ERTC for your business.

• Promises of a quick and easy process for securing the credit, with no evidence provided.

• Requests for sensitive information such as bank details, passwords, or Social Security numbers.

• Unsolicited offers to file your ERTC application for you.

• payment requests or offers of free services with hidden costs.

• Companies providing vague descriptions of their services or credentials.

By being aware of these red flags, business owners can take steps to eliminate the risk of employee retention credit fraud before it has a chance to occur. Additionally, they should keep up-to-date records of their financial activity and always consult with a qualified tax professional when filing ERC refunds.

Tips To Avoid ERTC Scams

Choose a Reputable Advisor

Select a reputable tax advisor or CPA with a deep understanding of the ERC claims and the specific requirements of your business. Make sure they have a credible track record.

Verify Credentials

Check the credentials of the company or individual you are considering to assist in your ERTC claim. They should be licensed and have a good standing in their profession.

Monitor Communications

Monitor communications for suspicious activity. Be wary of unexpected or unsolicited contact, and don't respond to communications asking for sensitive information.

Request Transparency

Ensure the person or company assisting you is transparent about calculating your credit, fees, and process. They should be able to explain this clearly.

Report Fraudulent Activity

In case you notice any suspicious activity, immediately report it to the Internal Revenue Service (IRS) and the local authorities. This will help stop the spread of fraud and protect other businesses.

Keep Documentation

Keep all documentation related to your ERTC claim. This includes correspondence, calculations, and submission records. This will help if your claim is ever audited or you become a fraud victim.

Regular Audit

Consider regularly auditing your financial records to ensure no discrepancies or fraudulent activities. This also makes sure you are compliant with the ERTC requirements.

Be Proactive

Be proactive in learning about ERTC and its guidelines. Understanding your responsibilities and the benefits you are entitled to is crucial. This knowledge can protect you from falling victim to scams.


Employers should be aware of the potential for Employee Retention Credit (ERC) fraud and take steps to protect themselves from it. It is significant to verify the credentials of anyone offering advice or assistance with ERTC applications and filing processes, as well as research companies and organizations, before engaging in ERC-related activities.

For more information on how to avoid ERC scams, business owners can consult the Internal Revenue Service (IRS) website, which has detailed guidance about employee retention credits eligibility requirements and the application process. With the proper precautions, employers can take advantage of the ERC without fearing fraud.

If you need help with your ERTC claiming process, head to the ERTC Express website, and you will not have to worry about getting scammed!