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The Dangers of Improperly Claiming the Employee Retention Credit

Updated: 7 days ago


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The Dangers of Improperly Claiming the Employee Retention Credit...

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Employee Retention Credit Help DFW

The Dangers of Improperly Claiming the Employee Retention Credit


Improperly claiming the ERC can lead to very serious consequences. If (and when) the IRS finds that the credit was incorrectly claimed, they can and will impose penalties, interest, audits, and even prosecutions.


While the IRS offered two ERC-related voluntary disclosure programs, the time to voluntarily come forward for both programs has now passed.


1. Penalties and Interest

  • Repayment: If your business claimed the ERC and the IRS determines that the credit was not properly earned (for example, if you didn't meet the eligibility requirements), you will almost certainly be required to repay the amount of the credit that was claimed.

  • Penalties: If the IRS finds that your company was not entitled to the ERC, the IRS will not only require you to repay the amount of the credit you claimed, but they will also hit you with penalties. Depending on the circumstances, a penalty ranging anywhere from 20% to 50% will be asserted.

  • Interest: If you were issued the credit based on incorrect claims, the IRS will charge interest on any amount you need to pay back. This interest accrues from the date you originally received the credit.


2. Audits

  • Auditing Your Tax Returns: The IRS has also indicated that the improper claiming of the ERC can also subject your company to an audit of your tax returns if they suspect improper ERC claims. This is in addition to having to repay the credit and being hit with penalties and interest. Audits can be time-consuming and intrusive, involving a thorough review of your financial records, employment taxes, and other business documentation.


3. Criminal Charges

  • In cases where the IRS believes there was fraudulent intent (for example, deliberately falsifying eligibility to claim the credit), criminal charges will be pursued. This can lead to fines or even imprisonment. It should also be noted that the IRS is very likely to "threaten" criminal charges in order to encourage you to agree with their terms.


Conclusion:


To avoid any of these issues, it’s essential to ensure that your ERC claim is accurate and based on legitimate eligibility. If you're uncertain about your claim or suspect you may have made a mistake, please reach us to us at Liberty Tax Defenders to ensure that you’re in compliance.


Fixing the issue now is far less costly than dealing with the potential consequences later. We can help you withdraw your claim before the IRS has the chance to come after you!


If you believe your business may have claimed the ERC in error, please reach out to us to discuss your options: 817-995-5008 or info@libertytaxdefenders.com.


We're here to help!


Cheers!




P.S. Make sure you get your FREE copy of our SPECIAL REPORT: "The 8 Secrets The IRS Does NOT Want You To Know!" (simply click on the link in the previous sentence, scroll down to the second section of our home page, and download your copy today!)


Or, email us at:  info@libertytaxdefenders.com for your FREE copy.


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