Tax Scam Alert: Disaster Relief & the Employee Retention Credit

With taxes come tax scams, and it’s important to stay informed on what these scams look like so you can protect yourself. Two of the biggest tax scams from 2023 that continue to impact taxpayers are disaster tax relief and the Employee Retention Credit (ERC), a COVID pandemic-related tax credit.

Disaster Tax Relief

Tax relief is often available due to natural disasters such as wildfires and hurricanes. In most cases, this requires the President to declare a disaster area or an act of Congress. If you are impacted by a disaster, you can check on what specific relief is available for your particular disaster on the IRS website. 

Here are some examples of the types of relief that are often available:

  1. Extended deadlines for tax filings
  2. Extended deadlines for tax payments
  3. Extended deadlines for paying payroll taxes
  4. Some penalty relief
  5. The ability to deduct certain disaster-related casualty losses – find more information here 

But scammers also offer to “help,” or rather to scam you. These scams almost always start with the scammer approaching you via telephone, social media, email, or in person. Often, they claim to work for the IRS or offer to help you get a payment or refund from the IRS for disaster relief. 

Instead of accepting help from people who approach you, seek help from charitable organizations you have worked with before, your tax professional, or a government agency.

The key is that you approach the person or entity. Don’t engage with someone who approaches you, and don’t provide those individuals with your private information. 

To find out what help is available to you as a victim of a disaster, call the IRS toll-free disaster assistance line at 866-562-5227. 

Any IRS employee who interacts with taxpayers should be able to provide their unique identification number. Before providing your personal information, call the closest IRS office to verify that the individual is an IRS employee. Or you can call this IRS number: 800-829-1040.

The IRS provides updated information regarding new and current scams here. 

Employee Retention Credit

This applies to business owners who had employees during the COVID pandemic. This credit was and still is being provided retroactively for employers whose businesses were impacted by the COVID pandemic in very specific ways. 

Scammers saw how much money was provided with this credit and decided to “help” employers get those credits in exchange for high fees for themselves. Often the scammers’ claims are similar to legitimate businesses that help with ERC claims. 

The scammers might say that your tax professional or CPA doesn’t understand the new credit. Or, if your tax professional told you that you didn’t qualify for the credit, the scammers say your tax professional was wrong, and they can get you the credit. Some scammers may be large companies with many employees. 

At some point, the IRS and Congress started looking at how much money was being provided due to this credit. The IRS instituted a brief pause of processing ERC claims until it could improve the processing of these claims and come up with a plan to seek out both incorrect and fraudulent claims in this area. 

The IRS has announced that they will be aggressively pursuing collections of incorrect claims and imposing penalties, including criminal penalties in some cases. 

Despite any assurances you may have received if you applied for the ERC, it is recommended that you review the situation and get a second opinion. If you or an expert determines that you should not have made the ERC claim, the IRS now has a process to withdraw an ERC claim. I strongly recommend consulting a tax professional with expertise in tax resolution before engaging in this process.