Let’s get one thing straight. If something sounds too good to be true – like firms “guaranteeing” you money by claiming credit you may not be eligible for – then it probably is.
Businesses faced many struggles throughout the pandemic. Luckily, the government implemented the Employee Retention Credit (ERC) initiative to support businesses through the hard times.
Unfortunately, however, this initiative became a magnet for fraud, spawning many firms – “ERC mills” – that wrongfully describe themselves as tax credit specialists helping companies claim for credit they are NOT eligible for.
To help get you up to speed, we recommend you read our previous blogs on ERC, where we explain, in detail, all you need to know about how the Employee Retention Credit can potentially put thousands of dollars back in your pockets!
In this post, we’re going to take a closer look at ERC mills, expose their deceptive tactics, and provide valuable insights to safeguard your business against ERC fraud.
Let’s dive in.
What is Employee Retention Credit (ERC)?
Before we delve into the dangers of ERC fraud, let’s briefly recap what the Employee Retention Credit entails.
As we have covered in previous articles, the Employee Retention Credit was a valuable tax incentive provided to businesses during COVID-19 to encourage business owners to retain their employees during challenging times.
It (still!) offers significant financial benefits to eligible businesses, helping to offset payroll costs and potentially claim thousands of dollars back in tax credits.
So it’s important to note that the Employee Retention Credit itself is NOT fraud. Far from it!
In fact, we’ve been able to secure an average $65,000 in cash back for our clients! You can read more about their success stories here.
However, with all good things, there often comes those that try to exploit the benefits.
Which is exactly what has happened with the deceptive practices being employed by “ERC mills” today.
What is an ERC Mill?
An ERC mill refers to a deceitful entity that takes advantage of businesses seeking assistance with Employee Retention Credit.
These fraudulent organizations make enticing promises to handle all ERC-related paperwork and secure substantial tax credits on behalf of businesses. However, their true intention is to exploit unsuspecting businesses for their own gain.
ERC mills employ deceptive tactics, including providing false information, fabricating documentation, and engaging in unethical practices.
They often charge exorbitant fees, promise excessive tax credit amounts, and offer inaccurate advice.
Businesses that fall victim to ERC mills not only lose money but also face legal and financial consequences for participating in fraudulent activities.
Working with reputable accounting firms with a proven track record with ERC claims, such as The Fitness CPA, is crucial to protect your business.
Using experienced professionals who understand regulations and can guarantee compliance is the only way to ensure that you receive the legitimate benefits you deserve.
Telltale signs of an ERC Mill
So, how can you spot an ERC mill?
If you wish to safeguard your business from the risks posed by ERC mills, you need to be able to recognize potential warning signs, including:
- Unrealistic Promises: Be cautious of ERC mills that make extravagant guarantees or promise unrealistically high tax credit amounts.
- Unsolicited Calls: ERC mills often call out of the blue before making promises and applying sales tactics.
- Exorbitant Fees: Nothing quite says “scam” like an extortionate upfront fee that doesn’t come without a clear explanation. Watch out for fees that seem ludicrous.
- Lack of Transparency: Be wary of ERC mills that are evasive about their processes, credentials, or client references. Don’t trust anything that seems wishy-washy and doesn’t get to the point.
- Pressure Tactics: Professional firms will never pressure you into making a decision, particularly if it affects your money. Any signs of pressure tactics should be taken as a red flag.
- Limited Communication: Steer clear of ERC mills with poor communication practices, making it difficult to reach them or receive timely updates.
Remember, working with a reputable accounting firm specializing in ERC ensures you receive expert guidance.
Stay vigilant and make informed decisions to ensure trustworthy professionals handle your ERC claim.
Consequences of engaging with fraudulent accounting firms
Unfortunately, if you do happen to accidentally hire an ERC mill to complete your refund, it can lead to severe consequences for your business.
We don’t want to scare you, but you could end up in legal trouble or thousands of dollars out of pocket. We’ve seen it happen.
Here are some of the repercussions you may face by associating with fraudulent entities:
- Financial Loss: By falling victim to any of their unlawful practices, you not only lose money but also miss out on the legitimate tax credits you could have received with the help of a reputable accounting firm.
- Legal Troubles: Fraudulent activities of these ERC mills can result in penalties, fines, and even criminal charges. As the taxpayer, you’re the liable one!
Audit Risk: Working with fraudulent or ’fake’ accounting firms increases the likelihood of your ERC claim being audited by tax authorities, which can subsequently land you in legal trouble should you not be careful.
Damage to Reputation: Clients, partners, and stakeholders may question your business ethics and credibility if they’ve noticed your association with an ERC mill. Do your due diligence to help protect your reputation! - Missed Opportunities: By relying on fraudulent accounting firms, you miss out on the opportunity to work with actual professionals who can help you maximize your legitimate tax credits. CPAs can provide valuable insights, strategic advice, and accurate documentation, enabling you to optimize your ERC benefits.
To protect your business from these dire consequences, conducting thorough research and choosing a reputable CPA with a proven track record is critical.
By selecting trustworthy professionals, you can ensure compliance, mitigate risks, and maximize your legitimate ERC benefits while safeguarding your business’s reputation and financial well-being.
Protecting your business from ERC Fraud
How do you protect your business from ERC fraud?
The key is to do your research up front.
Find a reputable tax accounting firm like The Fitness CPA who has proven testimonials and results that they can show you.
Just because something jumps and immediately takes your attention doesn’t mean it’s any good.
Take a step back, properly evaluate your options, and make the right decision that will not harm your business.
Here at The Fitness CPA, we’re here to make your life easy, not put you at risk for imprisonment or bankruptcy.
We’re offering a free calculation to help you understand how much you could receive back from the IRS without any obligation from you.
That’s right, it’s completely FREE!
Here are a few completely free actions that you can take now:
- Take our “Do You Qualify Quiz?” to find out if your business is eligible to receive a refund. Even if you have been previously told that you do not qualify, the rules have changed! It’s worth taking the 60-second quiz to find out.
- Get a Free Calculation. We offer a completely free calculation to help you determine whether or not it’s worth filing the paperwork to receive your ERC refund.
Hint: If you are in the fitness industry, we’re 99% sure it is! - Jump on a free call. If you prefer, we can jump on a quick call to discuss your ERC needs. The call is completely free and we’re here to answer any lingering questions you have:
Fitness is such a big part of who I am. Maintaining a healthy lifestyle, eating well (mostly paleo), hiking, backpacking, mountaineering, practicing yoga and Crossfit are all important cornerstones of life. But I love ice cream and cookies too much to say no!
I love helping owners make sense of their business and finding ways to grow it. It’s an honor to help you see situations, scenarios and opportunities from all sides so you can make informed decisions.
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