Employee Retention Credit (ERC): Key Events 2022-2024
Use the timeline below put together by our tax attorneys to learn more about ERC refund processing time updates and fraudulent ERC provider details released by the IRS in 2022, 2023, and 2024. If you have any questions, contact our team by calling (410) 497-5947 or clicking here for a free consultation.
September 16, 2024
Synergi Partners Under Sweeping Federal Investigation for ERTC Fraud
On September 16, 2024, FITSNews reported that Synergi Partners, a South Carolina-based tax credit consulting firm, was part of a sweeping federal investigation into alleged Employee Retention Tax Credit fraud. According to multiple sources, the investigation spans several states and focuses on the firm’s involvement in processing unsubstantiated tax credits and its network of referral providers. Synergi has been accused in several lawsuits of advising businesses and nonprofits to claim improper ERC payments while demanding large up-front contingency fees, a practice discouraged by the Internal Revenue Service (IRS). The IRS had already flagged ERTC fraud as a growing national issue, issuing warnings and listing it as part of its 2023 "Dirty Dozen" tax scams. The ongoing federal criminal investigation is rumored to involve numerous individuals and institutions across the country, with insiders predicting significant legal exposure for Synergi and other firms involved in the ERC fraud scheme.
August 15, 2024
IRS Reopens Voluntary Disclosure Program for ERC
On August 15,2024, the IRS reopened the Voluntary Disclosure Program (VDP) for businesses with improper Employee Retention Credit (ERC) claims. The program, which runs until November 22, 2024, offers businesses a chance to correct erroneous claims with a 15% discount on repayments and avoid future audits, penalties, and interest. This comes after the first VDP, which closed in March 2024 and saw over 2,600 applications disclosing $1.09 billion in improper credits. The IRS also announced plans to send up to 30,000 letters to businesses potentially holding over $1 billion in improper claims, urging them to self-correct through the VDP before compliance actions intensify.
April 16, 2024
NBC News: "Bogus 'Tax Service Specialists' Duped Business Owners in Latest Covid Relief Debacle, IRS Says"
NBC News highlighted the fraudulent practices of ERC promoters, including companies like ERC Specialists, that misled businesses into claiming the Employee Retention Credit (ERC). Many business owners, like Scott Volner of Missouri, were told by promoters they qualified for ERC, only to later find out they were ineligible. Volner had to repay $330,000 in credits he already spent. The IRS acknowledged that fraud and deception by ERC promoters led to a wave of bad claims, costing taxpayers hundreds of billions more than anticipated. IRS Commissioner Danny Werfel condemned these fraudulent ERC promoters, who charged as much as a third of each payout while filing claims for businesses that didn’t qualify. The IRS is now auditing thousands of claims and has launched 400 criminal investigations targeting ineligible ERC claims.
March 29, 2024
IRS Warns Against Aggressive ERC Promoters
The IRS issued a news release as part of its "Dirty Dozen" tax scams series, titled "Beware of aggressive promoters who dupe taxpayers into making questionable Employee Retention Credit claims; risks continue for small businesses, special withdrawal program remains available." The IRS warned small businesses about the ongoing risks posed by aggressive ERC promoters who mislead taxpayers into filing questionable claims. The IRS emphasized the importance of the special withdrawal program for those who may have been duped into filing improper ERC claims.
February 22, 2024
MB Automotive Specialists vs. ERC Specialists
MB Automotive Specialists filed a class-action lawsuit against ERC Specialists under the Illinois Uniform Deceptive Trade Practices Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. The lawsuit accuses ERC Specialists of filing improper ERC claims on behalf of small businesses, potentially exposing them to significant legal and financial risks.
February 19, 2024
Tax Notes: ERC Challenges by the IRS, to the IRS, and Among Various Parties
February 19, 2024, Tax Notes article by Hale E. Sheppard explores the increasing legal challenges surrounding the Employee Retention Credit (ERC), including issues with Synergi Partners and other third-party ERC promoters. Sheppard detailed how the IRS, grappling with compliance concerns, had referred thousands of ERC cases for audit, following its September 2023 moratorium on processing new claims. The article noted that Synergi Partners, among other firms, has been at the center of disputes over misrepresented ERC eligibility and contingency fees. As the IRS intensifies audits and investigations, including criminal probes into fraudulent claims, legal battles are expanding not just between taxpayers and the IRS, but also between businesses and ERC advisors like Synergi Partners. These growing disputes underscore the complexity of navigating ERC claims amidst IRS scrutiny.
January 26, 2024
IRS Commissioner’s Statement on ERC Marketing
In a Forbes article titled "IRS Is Hunting Bad ERC Tax Refund Claims Criminally, Urging Disclosure," IRS Commissioner Daniel Werfel addressed aggressive ERC marketing tactics, stating, "We saw aggressive marketing around this credit, and well-intentioned businesses were misled into filing claims. There’s a limited time window available for these businesses to voluntarily come in and avoid future issues." This statement highlights the IRS’s focus on addressing fraudulent claims and encourages businesses to come forward voluntarily.
January 12, 2024
Polk Mechanical Company Sues IRS
Polk Mechanical Company filed a lawsuit against the IRS for inaction on their ERC filings, submitted on January 27, 2022. The suit underscores the frustration businesses face with the IRS’s delayed processing of ERC claims amidst ongoing fraud investigations.
December 21, 2023
IRS Announces Voluntary Disclosure Program for ERC Refunds
On December 21, 2023, the IRS announced procedures for a Voluntary Disclosure Program (VDP) for taxpayers who believe they improperly received Employee Retention Credit (ERC) refunds. The program allows taxpayers to voluntarily return ERC funds they are not entitled to, helping them avoid severe penalties or audits. This follows the suspension of new ERC filings on September 14, 2023, and the introduction of an ERC claim withdrawal program on October 19, 2023. The deadline to apply for the VDP is March 22, 2024.
December 4, 2023
National Taxpayer Advocate Criticizes ERC Claims Processing
National Taxpayer Advocate Erin Collins criticized the IRS’s handling of ERC claims in an interview with Tax Notes, calling the processing "a mess." Collins highlighted a backlog of 983,000 unprocessed amended employment tax returns, many of which likely involve ERC claims. She warned that legitimate businesses are suffering financial hardships due to the IRS's slow processing and the misleading tactics of some ERC promoters.
December 1, 2023
Southern California Emergency Medicine Inc. vs. IRS
Southern California Emergency Medicine Inc. filed a lawsuit against the IRS and Commissioner Daniel Werfel, challenging the IRS’s guidance in Notice 2021-20, which allegedly restricted ERC payouts. The lawsuit seeks injunctive relief to prevent the IRS from applying these guidelines in a way that limits access to the credit.
November 22, 2023
FinCEN Alert on COVID-19 Employee Retention Credit Fraud
The Financial Crimes Enforcement Network (FinCEN) issued an alert about widespread fraudulent ERC claims. IRS Criminal Investigation (CI) identified over 323 investigations involving more than $2.8 billion in potentially fraudulent ERC claims across tax years 2020 to 2023.This fraud contributed to significant processing delays at the IRS, complicating the review of legitimate ERC claims.
November 9, 2023
Wall Street Journal: "IRS Warns Employers About This One Tactic to Claim Pandemic Tax Credit"
The IRS issued a memo clarifying that Occupational Safety and Health Administration (OSHA) guidelines do not qualify as "government orders" for the purposes of the Employee Retention Credit (ERC). The memo is part of the IRS’s tougher stance on ERC audits, as the agency has seen an increase in claims based on OSHA guidance. The IRS argued that OSHA guidelines encouraging worker safety measures like ventilation and distancing do not meet the legal definition of an order that would justify ERC claims. This memo has significant implications for businesses that have relied on OSHA guidance to qualify for the ERC, potentially leading to legal disputes as the IRS moves to disallow these claims. IRS Commissioner Danny Werfel emphasized that the IRS is targeting aggressive interpretations of ERC eligibility, and the memo may prompt some employers to withdraw their claims or repay refunds.
October 27, 2023
CNBC Article “How Innovation Refunds Cashed In on the Employee Retention Credit”
A CNBC investigation highlighted how Innovation Refunds profited from the ERC by acting as a middleman between small business owners and independent tax attorneys. The company spent millions on marketing and charged a 25% contingent fee for handling ERC claims. After the IRS announced a moratorium on ERC claim processing in September 2023, Innovation Refunds reduced its marketing efforts.
October 7, 2023
Yahoo Finance: "The IRS is Going After Scammy Firms Pushing Small Business Tax Credit"
Yahoo Finance reported on the IRS's crackdown on companies aggressively marketing the Employee Retention Credit (ERC) to small businesses, often referred to as "ERC mills." These firms have persuaded small business owners to file potentially fraudulent ERC claims, leading the IRS to pause the processing of new claims in September 2023. The IRS is now auditing and investigating these claims, with experts predicting criminal cases against the fraudulent firms.
September 14, 2023
Wall Street Journal: "IRS Shuts Door on New Pandemic Tax Credit Claims Until At Least 2024"
The IRS announced a halt to processing new Employee Retention Credit (ERC) claims until at least 2024 due to a surge in fraudulent and overstated claims. This decision also includes a review of more than 600,000 pending claims with stricter scrutiny. Employers with pending claims may withdraw them, and those who have received refunds could be given an opportunity to repay if they believe they no longer qualify. The IRS's move aims to disrupt a "pop-up industry" that aggressively marketed the credit to small businesses and nonprofits, with companies such as Synergi Partners and Innovation Refunds playing significant roles in encouraging businesses to submit ERC claims.
September 4, 2023
Wall Street Journal Explains: "How an Obscure Tax Break Became a 'Gold Rush'"
The Wall Street Journal released a video titled "How an Obscure Tax Break Became a 'Gold Rush," focusing on Bottom Line Concepts and the Employee Retention Credit (ERC). The video discussed ERC eligibility and featured Josh Fox, owner of Bottom Line Concepts, and his partner Kevin O'Leary, who created WonderTrust to direct businesses to Bottom Line Concepts. The video highlighted the aggressive marketing tactics used to promote ERC services on a contingent fee basis, while O'Leary acknowledged the presence of unscrupulous actors in the ERC space.
July 27, 2023
Testimony by Larry Gray, CPA, to the House Ways and Means Committee
Larry Gray, a CPA with over 20 years of experience as a Government Liaison for the National Association of Tax Professionals, testified before the House Ways and Means Committee about the growing threat of aggressive and misleading third-party ERC mills that target small businesses with improper and often fraudulent claims. Gray shared his firsthand experience dealing with firms like Bottom Line Concepts, ERC Specialists, and Jefferson Duke, which routinely assured businesses they qualified for the Employee Retention Credit (ERC) without properly evaluating their eligibility.
June 23, 2023
FITSNews: Synergi Partners Facing Scrutiny After ERC Fraud Lawsuits
On June 23, 2023, FITSNews reported that Synergi Partners, a South Carolina-based tax credit consulting firm, is under legal scrutiny for allegedly advising businesses to improperly claim Employee Retention Credits (ERC) and demanding high contingency fees. Lawsuits, including one from Marywood University, accused Synergi of providing faulty advice that led to improper claims, with Synergi seeking $900,000 in fees despite the university's ineligibility. Another lawsuit from Dynamic Integrated Services raised similar concerns about Synergi’s inaccurate ERC calculations and fees. Despite these allegations, Synergi claimed it does not offer tax advice or CPA services, raising questions about its practices. The IRS has warned businesses they are responsible for ensuring their claims are accurate, as investigations into ERC fraud intensify.
March 27, 2023
"ERC Dirty Dozen Debut Reminds Taxpayers to Seek 'Trusted Tax Professional'"
Frost Law published an article discussing the inclusion of the Employee Retention Credit (ERC) on the IRS's 2023 Dirty Dozen list of tax scams. The IRS's Dirty Dozen list highlights the most prevalent and dangerous tax scams, with the ERC making its debut due to a surge in improper claims and fraudulent practices. The article emphasized the importance of consulting with trained and trustworthy tax professionals to properly claim the ERC, given the complex analysis required to determine eligibility.
March 21, 2023
Frost Law: "Caution: Unscrupulous ERC Preparers Leave Taxpayers on the Hook"
Frost Law published an article cautioning businesses about the dangers of unscrupulous tax preparers exploiting the Employee Retention Credit (ERC) program. The article recounted a recent federal grand jury indictment in Utah, where two individuals and their accounting firm were charged with preparing fraudulent ERC claims, defrauding the government of millions of dollars. These preparers solicited ineligible parties, such as independent contractors, and converted them into S-corporations to falsely claim ERC benefits.
January 23, 2023
Frost Law: "ERC Haunted by Ghost Preparers - Who You Gonna Call?"
Frost Law published an article warning about the rise of "ghost preparers" in the Employee Retention Credit (ERC) process. Ghost preparers are individuals or entities that prepare tax returns or related forms, such as Form 941-X, without signing them, leaving taxpayers to submit these forms as "self-prepared." These preparers often disguise themselves as "consultants" or "specialty payroll companies," claiming they are not tax return preparers because they do not charge directly for preparing the forms. The article highlights the significant risks posed by ghost preparers, including potential audits, penalties, interest, and even criminal prosecution for both the preparer and the taxpayer.
November 13, 2022
Wall Street Journal: "Temporary Tax Break Sparks Cottage Industry, Raising IRS Alarms"
The Wall Street Journal highlighted the rise of a cottage industry surrounding the Employee Retention Credit (ERC), as firms aggressively marketed services to help small businesses claim the tax break. One notable incident involved Synergi Partners, a prominent ERC advisory firm, which was sued by Marywood University in June 2022. The university claimed Synergi Partners advised them to file for over $6 million in ERC refunds and sent an invoice for $901,942. However, Marywood’s outside accountants determined the university was not eligible for the credit. The lawsuit was later dismissed, with both parties reaching a mutual resolution. Synergi’s legal officer, Ashley Hogsette, emphasized that the firm does not pressure clients to take credits if they have concerns. The article underscored the risks businesses face when relying on third-party ERC advisory firms and the potential for improper claims leading to IRS audits, penalties, and legal disputes.
June 28, 2022
Times Tribune: Marywood University Sues Synergi Partners
Marywood University filed a federal lawsuit against Synergi Partners, alleging the tax consulting firm provided faulty advice about the Employee Retention Credit (ERC) under the CARES Act. The university claimed that Synergi wrongly advised them that they qualified for a $6 million ERC, leading to a $900,000 contingency fee demand from Synergi. However, after a review by its auditing firm, CliftonLarsonAllen LLP, Marywood discovered it did not qualify for the credit. Despite this, Synergi allegedly continued to demand its fee. Synergi's CEO, Jim Brown, denied knowledge of the university's concerns and vowed not to seek payment if Marywood was ineligible. This lawsuit was one of several actions taken against Synergi for similar claims regarding their handling of ERC qualifications.
