{"id":27326,"date":"2022-12-01T08:00:00","date_gmt":"2022-12-01T14:00:00","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=27326"},"modified":"2022-11-21T13:03:07","modified_gmt":"2022-11-21T19:03:07","slug":"signs-of-erc-fraud-and-how-to-avoid-them","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/practice-management\/signs-of-erc-fraud-and-how-to-avoid-them\/","title":{"rendered":"4 signs of ERC fraud\u2013and how to avoid them"},"content":{"rendered":"\n

Although the Employee Retention Credit (ERC) can certainly be very lucrative for clients<\/a>, many ERC professionals are claiming enormous ERC amounts, however possible to increase the amount of their fees, whether the company legitimately qualifies for it. This approach has resulted in many ERC fraud investigations by the IRS, with many more on the way.<\/p>\n\n\n\n

Working with such ERC fraudsters can impact our hard-earned reputation and credibility with clients who respect our opinion because they trust we\u2019re working in their best interest. To know how to spot an ERC fraudster before partnering<\/a> with them, here are four top signs of an ERC scam.<\/p>\n\n\n\n

Sign 1: There is an emphasis on selling clients\u2014not educating them<\/strong><\/p>\n\n\n\n

ERC providers get a quick win from taxpayers by flashing their largest ERC client amounts, but fail to help clients understand how they qualified for the ERC. This vagueness and ambiguity hide these consultants\u2019 ignorance and questionable practices from clients, and leaves them woefully unprepared to explain or justify their ERC eligibility in the IRS audit.<\/p>\n\n\n\n

At MBS Accountancy<\/a>, we\u2019ve launched a content campaign across our social profiles to educate companies about the facts and fiction of the ERC. Other professionals, including Dan Chodan<\/a>, have also consistently sounded the alarm about ERC fraudsters, and shared helpful ERC resources so clients and accountants don\u2019t fall for ERC scams.<\/p>\n\n\n\n

Sign 2: There are promises of ERC pre-qualifications<\/strong><\/p>\n\n\n\n

If I had a nickel for every time I heard clients tell me that someone told them they\u2019re pre-qualified for the ERC, I\u2019d own a Lamborghini. While you can make educated guesses about a company\u2019s ERC eligibility based on self-reported figures or circumstances, it\u2019s best to avoid providing an ERC eligibility determination for a client until after<\/em> you\u2019ve reviewed their financial statements and examined their circumstances.<\/p>\n\n\n\n

If a client approaches you asking why you\u2019ve found them ineligible, while another ERC professional said they were pre-qualified, point them back to the two main tests of ERC: the gross revenue test and the suspension test.<\/p>\n\n\n\n

Sign 3: The ERC suspension test is being abused<\/strong><\/p>\n\n\n\n

Many ERC shops are qualifying companies for the ERC based on invalid suspension test criteria, such as OSHA recommendations and CDC guidelines, which do not fulfill the government mandate requirement. Below is a brief debunking of some popular but invalid ERC claims:<\/p>\n\n\n\n