Important Update: IRS Issues ERC Compliance Warning - What Employers Need to Know

On October 19, 2022, the IRS released IR-2022-183, cautioning businesses about aggressive third-party promoters encouraging improper Employee Retention Credit (ERC) claims. While no new legislation expanded or extended the ERC after the Infrastructure Investment and Jobs Act cut it short in 2021, this IRS notice signaled a sharp increase in compliance oversight.

The agency reminded employers that they are ultimately responsible for the accuracy of their tax returns—even if a third party prepares the filing. Improper claims could result in repayment, penalties, and interest.

Watch Out for Scammers

The surge in ERC awareness created opportunities for unscrupulous promoters and pop-up firms who:

• Promise “guaranteed” refunds without reviewing eligibility details

• Charge excessive upfront fees or take large contingency percentages

• Submit inflated or fraudulent claims that put the business at risk

Red flags to watch for:

• Cold calls or emails pushing ERC services aggressively

• Preparers unwilling to sign the return or explain how eligibility is met

• Claims that “every business qualifies” regardless of facts

Protecting Your Business

Legitimate ERC claims require careful documentation of revenue declines or government-mandated shutdowns. Employers should work with trusted tax advisors who can:

• Evaluate eligibility under the IRS rules

• Prepare the necessary records and calculations

• Ensure filings align with both IRS guidance and audit standards

At incentAdvise, we emphasize compliance first. The ERC can still provide significant financial relief for businesses that truly qualify, but shortcuts or inflated claims could create serious problems down the line.