Employee Retention Credit Mills

Classification B, legitimate, commonly abused. Real tax law with a real benefit. Promoters break it.

Sold as: "ERC", "ERTC", "the COVID refund the government owes you", "up to 26,000 dollars per employee", "everyone qualifies"

If a firm told you everyone qualifies, took 20 percent of the refund, and would not sign the 941-X, you have a six-year statute and a two-year clock on any disallowance notice sitting in your file.

The pitch

Your business was partially suspended by COVID guidance, so you qualify for up to 26,000 dollars per employee. Everyone qualifies. Nothing is due up front: the firm takes a percentage of the refund when it arrives, and files the amended Form 941 for you.

What it costs you if it is wrong

The credit is repaid, and OBBBA's expanded Sec. 6676 adds 20 percent of the excessive amount, with no cap, for claims filed after July 4, 2025. The assessment window is six years. The trap is Sec. 6532(a): once a notice of disallowance issues you have TWO YEARS to file suit, reach agreement, or execute an extension, and missing it bars the refund even where the claim was good.

Red flags

The firm told you everyone qualifies
The fee is a percentage of the refund
The preparer would not sign the Form 941-X
Eligibility was decided in a phone call
Nobody asked for the government order that suspended your operations
The income tax returns were never amended for Sec. 280C

Questions to ask the person selling this

1Which specific government order suspended my operations? Show me the document.
2Will you sign the Form 941-X as preparer?
3Is your fee a percentage of the refund?
4What is in the eligibility file, and how long did the analysis take?
5Have owner and related-party wages been excluded under Sec. 51(i)(1)?
6Who amends my income tax returns to reduce the wage deduction under Sec. 280C?

Back to the full entry