In the 1920s, an Italian con artist named Charles Ponzi devised a scam that promised investors a 50 percent profit through his scheme to buy US postage stamps at a discount in one area and sell them at full price in another. Eventually, investors realized they were not getting the promised 50 percent return on their investment and demanded their money back. Ponzi could not get enough new investors to cover the loss, and the scheme collapsed.
In 1985, Enron became an innovative energy trader and supplier that flourished during the dot-com bubble of the 1990s, with stocks reaching $90 per share. But a combination of fake holdings, off-the-books accounting practices, the use of special purpose entities (SPEs) to hide its mountains of debt and toxic assets, a complicit top-tier accounting firm (Arthur Anderson) concealing documents, and poof – about $74 billion disappeared from the economy in just a few years.
While most recognize these two well-known scams, financial cons continue to plague us today. How many times a day does someone call about your home or car warranty needing renewal? Or you have a relative stuck in a foreign country that requires you to send money. Or finding out you won a lottery or some other massive prize from a game or contest you didn’t enter, but in order to claim the money or prize, you first need to send money to the organizer. Creativity abounds when taking money from innocent people, even involving legitimate government programs like the ERC (Employee Retention Credit).
The Employee Retention Credit
The ERC is a legitimate program, much like the PPP (Paycheck Protection Program); it provides government aid to businesses impacted by the COVID-19 pandemic. There are three fundamental questions the IRS offers to determine if churches or businesses qualify for the ERC:
- Did your church or organization have employees and pay wages to them between March 13, 2020, and December 31, 2021?
- During that time, were you a self-employed individual who did not have employees?
- Did the church or organization encounter a significant decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters (Jan. through Sept.) of 2021?
The ERC is a legitimate plan from the United States government to help churches and businesses that took a significant financial hit during the pandemic. However, that doesn’t prevent bad actors from ruining the program and leaving innocent victims in their wake.
The ERC Scammers
As sick as it sounds, some money-hungry schemers have no limits to the depths they will descend to get money – even taking it from churches. Such is the case with the ERC or the Employee Retention Credit program. For a fee, these crooks promise churches and other businesses maximum payout, even if they don’t qualify. The promise of free money from the government is too tempting to pass up for churches and businesses still reeling from the COVID-19 pandemic, causing them to fall prey to the scam. It’s become such a problem that on September 14, 2023, the IRS put a moratorium on processing new ERC claims.
Withdrawing an ERC Claim
If you believe that a scammer victimized your church or business by filing a false ERC claim, the IRS offers an opportunity to withdraw your ERC claim. The process to withdraw a claim depends upon the church or business’s situation. The IRS has three categories of eligibility:
- Church’s or businesses that haven’t received a refund and haven’t been notified your claim is under audit.
- Church’s or businesses that haven’t received a refund and have not been informed the claim is under audit.
- Church’s or businesses that received a refund check but haven’t cashed or deposited it.
If your church or business falls into this category, don’t let the opportunity to correct the issue pass by. Get with a legitimate accounting firm and clear up this matter as soon as possible.
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