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  • MyTAXPrepOffice Editorial Group

Seven Warning Signs of Incorrect ERC Claims

In response to a surge in questionable claims for the Employee Retention Credit (ERC), the Internal Revenue Service (IRS) has taken proactive steps to combat misinformation spread by promoters. They're urging businesses to watch out for seven warning signs of potentially invalid claims and are offering assistance through specialized programs.

How to Fix Questionable ERC Claims

To address the issue, the IRS has intensified compliance measures such as audits and investigations. They're also planning further action to ensure compliance in the future. For businesses that may have been misled, the IRS has introduced special programs, including a limited-time offer valid until March 22, 2024, allowing employers to rectify improper ERC claims at a reduced cost.

Employers who incorrectly claimed the ERC can avoid penalties and interest, and even receive a discount on repayments, by applying to the ERC Voluntary Disclosure Program before the deadline. Additionally, the IRS is providing a process for businesses with pending claims to withdraw them. Taking prompt action to address these issues can prevent future consequences, and the IRS advises businesses to seek assistance from tax professionals.

What are the 7 warning signs?

IRS Commissioner Danny Werfel emphasized the urgency, stating, "Time is running out to take advantage of special IRS programs designed to help businesses misled into making questionable Employee Retention Credit claims." He highlighted seven key indicators that businesses should review to assess the validity of their claims.

These indicators include:

  • overly broad claims across quarters

  • misinterpretation of government orders

  • incorrect wage calculations

  • dubious supply chain issues

  • improper claim periods

  • and claims made by non-existent entities.

Businesses should also be cautious of promoters who downplay the risks associated with ERC claims.

Get More Information

The IRS has provided resources such as an ERC Eligibility Checklist and frequently asked questions to assist taxpayers and tax professionals. Additionally, they've introduced two programs—the ERC Voluntary Disclosure Program and a claim withdrawal process—to address improper claims and minimize associated costs.

The Voluntary Disclosure Program allows businesses to repay incorrect ERC amounts at a discounted rate, while the withdrawal process enables taxpayers to retract erroneous claims without penalties or interest. These initiatives aim to rectify misunderstandings and ensure compliance with ERC regulations.


Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.


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