What To Do if Your Business is Being Investigated for ERC Fraud

The Employee Retention Credit (ERC) was introduced as part of the CARES Act to help businesses retain employees during the COVID-19 pandemic. While this credit has provided significant relief to many businesses, it has also led to increased scrutiny and investigations into potential fraud. Taking immediate and strategic steps to protect your interests is crucial if your business is being investigated for ERC fraud.

What Constitutes ERC Fraud?

ERC fraud occurs when businesses intentionally or negligently misrepresent their eligibility or the amount of wages paid to claim the credit. Here are some common forms of ERC fraud:

False Claims of Eligibility

Businesses may falsely claim that they meet the eligibility criteria for the ERC, such as experiencing a significant decline in gross receipts or being subject to a government shutdown order.

Inflated Wages

Employers might inflate the qualified wages paid to employees to maximize the credit they receive.

Ineligible Employees

Claiming the credit for employees who do not qualify under the ERC guidelines, such as those not retained during the specified periods.

Duplicate Claims

Attempting to claim the ERC for the same wages as other relief programs, such as the Paycheck Protection Program (PPP), has already been used.

Steps to Take if Your Business is Being Investigated for ERC Fraud

If your business is being investigated for ERC fraud, it is crucial to act swiftly and strategically to protect your interests and mitigate potential damage. Being proactive can make a significant difference in the outcome of the investigation. Here are the essential steps to take if you find your business under scrutiny for ERC fraud.

1. Understand the Allegations

The first step is to understand the specific allegations against your business. ERC fraud investigations can arise from various issues, including:

• False Claims: Falsely claiming ERC funds by inflating payroll numbers or misrepresenting the financial impact of COVID-19.
• Ineligible Claims: Claiming ERC funds for employees who were not eligible or for wages that do not qualify under the ERC guidelines.
• Documentation Issues: Failing to maintain adequate records to support your ERC claims.

Understanding the nature of the allegations will help you and your legal team develop an appropriate defense strategy.

2. Seek Legal Counsel Immediately

Engaging an experienced criminal defense attorney is crucial when facing an ERC fraud investigation. At Candice Fields Law, PC, we have the experience to navigate the complexities of such cases. Your attorney can:

• Advise You on Your Rights: Understanding your legal rights is essential to avoid self-incrimination and ensure you are treated fairly during the investigation.
• Develop a Defense Strategy: An experienced attorney can help you build a strong defense, whether that involves proving your claims were legitimate, highlighting procedural errors in the investigation, or negotiating a settlement.
• Communicate with Investigators: Your attorney can handle all communications with investigators, ensuring that your responses are accurate and that your interests are protected.

3. Preserve and Organize Documentation

Maintaining thorough and organized records is critical in defending against ERC fraud allegations. Ensure that all documentation related to your ERC claims is preserved, including:

• Payroll Records: Detailed records of payroll expenses for the periods you claimed ERC.
• Financial Statements: Documentation showing the financial impact of COVID-19 on your business.
• Communication Records: Any correspondence related to ERC claims, including emails and letters from tax professionals or the IRS.

Organizing this documentation can help your legal team quickly access the information needed to build your defense.

4. Cooperate with the Investigation

While it is essential to protect your rights, it is also important to cooperate with the investigation. This does not mean providing unrestricted access to all your records or making statements without legal advice. Instead, it involves:

• Responding to Requests: Responding timely and accurately to legitimate requests for information or documentation.
• Avoiding Obstruction: Do not destroy or alter records, as this can lead to additional charges of obstruction of justice.

5. Conduct an Internal Review

An internal review of your ERC claims can help identify potential issues and prepare your defense. This review should include:

• Verifying Eligibility: Ensure all employees and wages claimed for ERC meet the eligibility criteria.
• Reviewing Calculations: Double-check the calculations used to determine the amount of ERC claimed.
• Identifying Errors: Identify any errors or discrepancies in your claims that must be addressed.

An internal review can help you proactively address issues and demonstrate your commitment to compliance.

6. Prepare for Possible Outcomes

An ERC fraud investigation can result in various outcomes, including:

• No Action: If the investigation finds no wrongdoing, no further action may be taken.
• Civil Penalties: The IRS may impose civil penalties, including fines and repayment of ERC funds.
• Criminal Charges: In severe cases, criminal charges may be filed, leading to potential imprisonment and further financial penalties.

Understanding the possible outcomes can help you and your legal team prepare for different scenarios and develop a comprehensive defense strategy.

How To Tell You're Being Investigated for ERC Fraud

Recognizing the signs of an investigation early can help you take proactive steps to protect your business. Here are key indicators that your business might be under investigation for ERC fraud:

• Unusual IRS Correspondence: Unexpected letters or notices requesting additional information or notifying you of an audit.
• Requests for Detailed Documentation: Comprehensive requests for payroll records, financial statements, and other ERC-related documents.
• Increased Scrutiny During Audits: Auditors focus extensively on ERC claims, questioning eligibility and accuracy.
• Contact from Law Enforcement: Direct interactions with federal agencies like the FBI or IRS Criminal Investigation Division.
• Subpoenas and Legal Notices: Receiving subpoenas for documents or testimony related to your ERC claims.
• Changes in Business Relationships: Banks, vendors, or partners hesitate to engage or terminate contracts abruptly.
• Unusual Surveillance or Monitoring: Noticing unfamiliar individuals or increased scrutiny of your activities, both physically and electronically.
• Advice from Your Accountant or Tax Professional: Accountants or tax advisors informing you of irregularities or advising specific actions related to ERC claims.

How an ERC Fraud Defense Lawyer Can Help

Facing an investigation for ERC fraud can be overwhelming and stressful. At Candice Fields Law, PC, our experienced ERC fraud defense lawyers provide essential support and guidance to help you navigate this challenging time. Here's how we can assist you:

Experienced Legal Advice

We offer comprehensive legal advice tailored to your specific situation. Understanding the complexities of ERC regulations and fraud allegations is crucial to building a strong defense.

Thorough Investigation

Our team conducts a meticulous investigation into the allegations against you. We examine all relevant documentation, financial records, and communications to uncover any inconsistencies or errors that could work in your favor.

Strategic Defense Planning

We develop a strategic defense plan customized to your case. Whether it's demonstrating a lack of intent, challenging the evidence, or negotiating with authorities, we ensure your defense is robust and well-prepared.

Effective Communication with Authorities

Handling communications with investigators can be daunting. We manage all interactions with law enforcement and regulatory agencies, ensuring your rights are protected and you do not inadvertently incriminate yourself.

Documentation and Evidence Management

Proper documentation is key to your defense. We assist in organizing and presenting your records in a manner that supports your case, highlighting legitimate claims and correcting any inaccuracies.

Mitigation of Penalties

In cases where penalties are unavoidable, we work diligently to mitigate the impact. We aim to reduce fines, prevent imprisonment, and protect your business’s reputation as much as possible.

Ongoing Support and Guidance

We provide continuous support and guidance throughout the investigation and any subsequent legal proceedings. We keep you informed at every step, offering reassurance and experienced advice to help you make informed decisions.

Take Action Now

Don't wait until it's too late. If you suspect your business is being investigated for ERC fraud, contact Candice Fields Law, PC, today. Our experienced legal team is ready to provide the guidance and defense you need to protect your business. Schedule a confidential consultation now to ensure your rights and interests are safeguarded.