Employee Retention Credit Scams: Tips for Business Owners

employee retention tax credit scamThe US government implemented the Employee Retention Credit (ERC) program to support businesses affected by the COVID-19 pandemic. This is a legitimate credit that has provided a financial lifeline to millions of businesses. But there continue to be promoters who aggressively mislead people and businesses into thinking they can claim these credits. Anyone who is considering claiming this credit needs to carefully review the guidelines. This article will discuss tips on avoiding ERC scams and protecting your business.

These scams often involve promises of larger tax refunds or faster processing times.  They may also file improper or false tax returns on behalf of the company, leading to further complications.

Understanding the Employee Retention Credit Program

Before we delve into avoiding ERC scams, it is essential to understand what the ERC program is and how it works. The ERC is a refundable tax credit introduced in the CARES Act in March 2020. It is available to eligible employers adversely affected by the COVID-19 pandemic and is designed to help retain their employees.

The credit can be claimed on the employer’s quarterly tax return or as an advance refund. Eligible employers include those whose operations were fully or partially suspended due to COVID-19 or experienced a significant decline in gross receipts.

Common Scams Targeting ERC Program Participants

Unfortunately, scammers are exploiting the ERC program to defraud business owners. The Federal Trade Commission (FTC) has received numerous complaints about ERC scams, with losses totaling millions of dollars. These scams take various forms, but they typically involve fraudsters posing as ERC program agents or offering assistance in claiming the credit for fee.

Some common ERC scams include:

  • Avoid unsolicited phone calls and emails claiming to be from the IRS. The scammer may ask for personal information, such as Social Security numbers, bank account numbers, or EINs, and use it to commit identity theft or financial fraud.
  • Fake ERC program websites that ask for personal or financial information to process the credit. These sites may look legitimate but are designed to steal information and money from unsuspecting victims.
  • Offers to assist in claiming the ERC for a fee. Scammers may pose as tax preparers, lawyers, or accountants and promise to expedite the credit for a fee. However, these services charge fees before filing for an ERC tax credit.

How to spot and avoid ERC scams

It is essential to remember that the IRS will never initiate contact with taxpayers via email, text messages, or social media. Legitimate IRS representatives will contact you by mail first and never demand immediate payment or threaten legal action.

It is essential to be vigilant and follow these tips to avoid:

  • Verify the legitimacy of the ERC program agent by checking the IRS’s list of authorized agents or calling the IRS at 800-829-1040.
  • Only provide personal or financial information to someone claiming to be an ERC program agent if you have verified their identity and legitimacy.
  • Use caution while dealing with unsolicited emails or text messages. They may contain malware or phishing scams designed to steal your information.
  • Be skeptical of offers to assist in claiming the ERC for a fee. 

What to do if you are victim of an ERC scam

Suppose you believe that you have been the victim of an ERC scam. In that case, you should report it to the IRS immediately and take steps to protect your personal and financial information, such as changing your passwords and monitoring your credit report.

If you fall victim to an ERC scam, it is essential to take swift action to minimize the damage. Here are some steps you can take:

  • Contact your bank immediately if you have shared sensitive data with the scammer. They may be able to freeze your account and prevent further unauthorized transactions.
  • File a report with your local police and the FTC at ftc.gov/complaint. Providing as much information as possible, including phone numbers, email addresses, or websites the scammer uses, can help law enforcement track down the culprit.
  • If you mistakenly shared any credit/debit card information, call your bank to block your card to prevent the scammer from unauthorized activity.

Verify the Status of an Enrolled Agent

If you need to verify whether someone is an enrolled agent, there are specific steps you need to follow to ensure you obtain the correct information. Verifying the status of an enrolled agent can be crucial when it comes to tax and financial matters. We will guide you on how to verify the status of an enrolled agent in the most efficient way possible.

Email Requests for Enrolled Agent Status Verification

The easiest and most convenient way to verify the enrolled agent status is by emailing epp@irs.gov. When making this request, providing as much information as possible is important to reduce the likelihood of verification errors. Below are the details you should include in your submission:

Full Name 

Complete Address (if available) 

Enrolled Agent Number (if available)

It is important to note that this mailbox is solely for enrolled agent status verification and not for verifying IRS employee status.

Expectations and Response Time

The IRS Office of Enrollment has a policy of responding to all inquiries within 72 hours. However, keep in mind that unanticipated operational demands may result in a delay in responding.

In the meantime, wait to make any decisions or take any actions that rely on the verified status of an enrolled agent until you have received a response from the IRS. This will ensure that you have the most up-to-date and accurate information.

Benefits of Verifying Enrolled Agent Status

Verifying the status of an enrolled agent or can help prevent any potential financial or legal issues down the line. Furthermore, if you are considering hiring an enrolled agent to assist you with tax matters, verifying their status beforehand can help ensure as the best ERC company is qualified and authorized to represent you before the IRS.

Other Resources for ERC Program Participants

If you are an ERC program participant and need assistance with claiming the credit or avoiding scams, there are several resources available to you:

  • The IRS has a dedicated webpage for ERC that provides detail information on how to claim the credit and other related topics.
  • Your tax preparer or accountant can also provide valuable advice and assistance in claiming the ERC and avoiding scams.

In conclusion, the ERC program can provide critical relief for businesses affected by the COVID-19, but scammers also exploit it to defraud unsuspecting business owners. By understanding the program’s requirements, being vigilant can protect your business from ERC scams and avoid becoming a victim.


  1. Is the ERC program only available to businesses that were fully closed due to COVID-19?

No, the ERC program is available to eligible employers who experienced a significant decline in gross receipts or were fully or partially suspended due to COVID-19.

  1. Can I claim the ERC retroactively for wages paid before March 12, 2020?

No, the ERC is only available from March 12, 2020, until January 1, 2022.

  1. Can I claim the ERC if I received a Paycheck Protection Program (PPP) loan?

You could claim the ERC even if you received a PPP loan. However, you cannot claim the ERC for wages paid with PPP loan proceeds.

  1. How long does receiving the ERC fund after filing with IRS take?

The IRS generally processes and issues refunds for the ERC within 21 days to 90 days of receiving a complete and accurate claim.

  1. Is it safe to provide my EIN to an ERC program agent over the phone or by email?

Providing your EIN to an ERC program agent is generally safe, but be cautious about sharing sensitive information such as your bank account or Social Security number. Always verify the genuineness of the person or organization you are communicating with before sharing any information.


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