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The ERC company I used inflated my employee count to get a bigger credit, what are the consequences?
- Inflating your employee count or wages to claim a larger ERC is considered fraud. If the IRS discovers this, you could face:
- Repayment of the credit: You'll have to repay the entire amount of the improper credit, plus interest.
- Penalties: The IRS may impose significant financial penalties.
- Audits: Your business could be subject to a thorough IRS audit.
- Legal action: In severe cases, the IRS may refer your case to the Department of Justice for criminal prosecution.
What are the consequences of ERC fraud for businesses?
- IRS Audits and Penalties: The IRS is actively auditing ERC claims. Businesses with incorrect claims may face audits, penalties, and interest on the improperly claimed amount.
- Repayment Obligations: Businesses may be required to repay the full amount of the improperly claimed credit, plus interest.
- Potential Legal Actions: In cases of intentional fraud, the IRS may involve the Department of Justice, leading to legal consequences.
How can businesses protect themselves from ERC scams?
- Consult with Reputable Professionals: Work with licensed professional attorneys. Avoid firms charging fees based on a percentage of the refund.
- Verify Eligibility Independently: Understand the ERC eligibility criteria yourself and don't solely rely on third-party assessments.
- Document All Claims: Maintain thorough records to support your ERC claims in case of an audit.