December 5, 2022

Beware Employee Retention Credits That Are "Too Good to Be True"

Holland & Knight Alert
Nicole M. Elliott | Abbey Benjamin Garber | Bibiana A. Cruz

Employers throughout the U.S. have been receiving advertisements and direct solicitations from third parties offering attractive tax savings in the form of Employee Retention Credits (ERC). Oftentimes, these third parties improperly promise employers eligibility for the ERC, compute their alleged credit, and even file amended employment tax returns in exchange for large lump sum payments or payments contingent upon the amount of the ERC received.

The IRS is aware of these types of schemes and is encouraging employers to be careful with these offers that are "too good to be true." The IRS also reminds taxpayers that they are always responsible for the information reported in their tax returns, including the repayment of any improperly claimed ERCs along with penalties and interest.

Any tax-related illegal activities related to ERC claims can be reported to the IRS by submitting Form 3949-A, Information Referral. Fraud and IRS-related phishing attempts can also be reported at 1-800-366-4484.

Recipients of these advertisements and direct solicitations are encouraged to consult their tax advisor with respect to their eligibility for ERCs. More information on ERC and eligibility is available in a previous Holland & Knight alert, "Update for Employers: Recent Legislation Improves, Extends Employee Retention Credit," May 27, 2021.

For any questions or additional guidance regarding these types of solicitations, contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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