Kushner | Law Group PLLC
Kushner | Law Group PLLC
Kushner | Law Group PLLC

Vigorous Advocates Fighting For Your Rights

Employee Retention Credit fraud charges: The basics

On Behalf of | Jul 3, 2024 | White Collar Crimes |

The Employee Retention Credit (ERC) has served as a lifeline for numerous businesses facing hardships due to world events that began to unfold in 2020. This government program offered a lifeline by providing tax credits to qualified employers who retained employees on their payroll when times were particularly tough.

However, with any substantial financial incentive, the potential for misuse arises. Some businesses saw this program as an opportunity for financial gain, leading to a surge in fraudulent claims, including Employee Retention Credit fraud. The complexity of these cases and the severe potential consequences of a conviction makes it essential for those accused of wrongdoing to have knowledgeable legal guidance from the outset.

What is Employee Retention Credit Fraud?

Employee Retention Credit fraud involves the illegal claiming of ERC funds that can take various forms, like submitting false information about employee wages or manipulating business revenue figures. Perpetrators might also create fake employees to claim higher credits. The IRS has stringent guidelines, and any business violating them can result in serious legal consequences.

Rising trend of prosecutions

There has been a significant uptick in ERC fraud investigations and prosecutions in recent years. The Department of Justice and the Internal Revenue Service (IRS) have made it a priority to identify and pursue cases of suspected fraud. This increased scrutiny has led to a wave of charges against business owners, executives and even some tax preparers.

IRS plans to deny most claims for the Employee Retention Credit program due to fraud concerns. IRS Commissioner Danny Werfel stated that around 70 percent of claims have “red flags,” indicating they are likely inaccurate, prompting heightened scrutiny and investigation.

Common charges in ERC fraud cases

When prosecuting ERC fraud, federal authorities typically bring several charges, like:

  • Wire fraud: This charge often stems from electronically submitting false information to claim the credit.
  • False statements: Making false declarations on tax forms or during investigations can lead to this charge.
  • Conspiracy: If multiple individuals are involved in the scheme, conspiracy charges may be added.
  • Tax evasion: In some cases, ERC fraud is part of a larger pattern of tax-related crimes.

These charges carry severe penalties, including substantial fines and potential prison time. The specific consequences for violating IRS legal terms can depend on legal factors like the amount of money involved and the defendant’s criminal history.

As ERC fraud prosecutions continue to rise, the need for reputable legal guidance becomes increasingly evident. If you’ve been accused of misconduct, navigating the complexities of federal criminal defense requires legal help to protect your rights and work toward the best possible outcome.