Small Businesses Alerted by IRS About COVID Tax Credit Scam

The IRS is warning small businesses to be wary of telemarketers promising thousands of dollars in Employee Retention Tax Credits. While the credit was established to help businesses during the COVID-19 shutdown, scammers are taking advantage of the situation.

These fraudulent companies are reaching out to small businesses, claiming almost everyone is eligible for the credit and offering to handle the application process for a fee. However, the IRS has issued several warning signs to look out for, including unsolicited calls, requests for upfront money, and promises of determining eligibility without knowing the business’s tax situation.

Unfortunately, many businesses that fall for these scams end up not meeting the eligibility requirements and are forced to repay the funds with interest and fines. Scott Volner, President of Catalytic Innovations LLC, in Missouri, received $330,000 in funds through one of these scams and now faces the daunting task of repaying it all.

IRS Commissioner Danny Werfel estimates that there has been $2.8 billion in fraud connected to the Employee Retention Tax Credit so far. Small business owners are urged to be cautious and seek advice from tax professionals before applying for any tax credits to avoid falling victim to these scams.