Increase in scammers and delays in refunds


By Brock Blake, Contributor

Just in time for tax season, the IRS recently released his “Dirty Dozen” list. The agency says this list represents the worst of the worst tax scams, and is releasing it as a way to warn and urge businesses and consumers to be vigilant and not fall victim to one of these scams. In theory, this is a great way to protect both businesses and consumers. This year, however, many legitimate organizations are expressing concern that the list may have done more harm than good to the Employee Retention Tax Credit (ERTC or ERC) industry. As possible evidence of this, the number of bad actors and illegitimate ERC applications has risen to an all-time high since the publication of the list.

The ERC was part of the CARES Act and focused on providing tax credits to eligible employers for employee retention during the height of the pandemic (up to $26,000 per employee). As the CEO of a company that, among other services and products, helps small businesses (SMEs) receive the ERC, I have seen firsthand the applicants coming out of the woodwork, to believe they can make a quick buck and then disappear just as quickly as they appeared. I’ve also seen organizations (similar to the ones we saw during the Paycheck Protection Program) that lack compliance, controls, and processes and, as a result, over-promise for the amount of refunds an applicant qualifies for. So I was actually happy to see these “mills,” bad actors, and scam artists being sued by the IRS.


Calling out a scam… creates more scammers?

However, in the weeks following the announcement of Dirty Dozen, we’ve seen a dramatic increase in scammers and unqualified applicants for the ERC, and not just us. Nearly every major, credible ERC services company has had to temporarily cut marketing spend on critical channels like Google and Bing to sift through fraudulent leads and ensure qualified, eligible SMBs get what they need. Unfortunately, this type of fraud ultimately hurts the mom-and-pop stores and other small businesses that the credit was set up to help.

Legitimate small businesses should be very careful who they partner with to apply for the ERC credit, if they qualify. As a business owner, you need to make sure you calculate the credit correctly or you risk being audited in the future and potentially facing fines or other penalties (in addition to having the credit refunded).

Delays in refunds

Unfortunately, not only the scammers put a damper on the ERC. In March, 15 congressmen sent from the Ways and Means Committee a joint letter to the Commissioner of the IRS requesting an investigation into “numerous investigations and compounding complaints about the lengthy delays in processing the ERTC and the lack of information being provided to those awaiting resolution of their claims. ” Legitimate small businesses that apply for the credit find it takes nearly 12 months (or longer) to receive the credit. This may not be a problem for enterprises and larger companies, but for small and medium-sized businesses, this credit can mean life or death for their organization.


The Tax and Customs Administration recently responded to the letter from commitment to double the number of applications processed each week. Is that enough to handle the 900,000+ requests waiting in the backlog to be processed?

My concern is that the bad actors could overshadow the legitimate companies trying to help others get the ERC, and that the late payments could further hurt Main Street businesses that have fought so hard to survive during the pandemic. We are now on a mission to help educate entrepreneurs, regulators and the community at large.

Don’t lose sight of the possibility

Lendio exists to help SMEs not only survive but thrive, and we’ve seen how receiving the ERC can help businesses move into their next stage or phase. The ERC is a great option for SMEs that are hiring employees during the pandemic and meet the specific eligibility requirements of the program. To get quality, a company had to have had one of the following:


  • A sufficient drop in turnover in 2020 or 2021 compared to 2019:
  • 50% decline for the 2020 quarters
  • 20% decline for the quarters of 2021
  • OR, a full or partial shutdown caused by a government contract that has a 10% impact on the company’s operational size or ability to operate, OR
  • OR, an operational start date after February 15, 2020 combined with less than $1 million in annual revenue

If any of the above has occurred in your business, you should talk to a qualified professional to determine if you qualify for a tax credit. The amount of the tax credit is determined by the total payroll costs paid to W-2 employees during qualifying quarters, or the duration of a full or partial shutdown due to government mandate related to COVID-19. Find a tax professional who is well-versed in ERC and can help you navigate the complexities of credit – this is essential to helping you file correctly and receive the full amount you qualify for.