Last Year, ERTC Scams Rose To The Top Of The IRS’s “Dirty Dozen” Tax Scams List
Washington, D.C. – U.S. Senator Catherine Cortez Masto (D-Nev.), Senate Finance Committee Chair Ron Wyden (D-Ore.), and Senate Small Business and Entrepreneurship Committee Chair Jeanne Shaheen (D-N.H.) led a letter urging the Federal Trade Commission (FTC) to investigate deceptive marketing and advertising practices by predatory tax promoters who preyed on small businesses with false claims about the Employee Retention Tax Credit (ERTC).While the program was critical during the pandemic, a fraudulent advertising campaign designed to mislead and steal from small businesses resulted in millions of ineligible claims being submitted to the IRS, causing the agency to halt ERTC processing. In their letter, the senators call on the FTC to work with the IRS to hold these bad actors accountable and protect impacted small businesses from unnecessary penalties.
“We are writing to request that the Federal Trade Commission (FTC) investigates potential abusive and deceptive advertising practices that have led to the Internal Revenue Service’s (IRS) moratorium on processing employee retention tax credits (ERTC),” said the senators. “…While this moratorium is meant to give the IRS time to investigate the scams impacting ERTC claimants, we urge the FTC to review whether ‘unfair or deceptive acts’ or violations of advertising laws have occurred.”
The ERTC was designed to help businesses keep their workers during the pandemic, but high incidences of fraud have caused a backlog of nearly a million unprocessed claims. In 2023, ERTC scams rose to the top of the IRS’s “dirty dozen” tax scams list, a significant shift from their absence on the list the previous year. Between 2022-2023, over 9,000 ERTC ads aired on TV, with approximately three-quarters coming from a single source.
“The FTC can and should work in conjunction with the IRS to combat the biggest offenders…and, when necessary, punish them for providing misleading information to claimants,” continued the senators. “With FTC action, the pervasiveness of predatory advertisements pushing ineligible businesses to file for ERTC can be curbed, reducing the workload of the IRS and protecting these businesses from exposure to penalties.”
In addition to Senators Cortez Masto, Wyden, and Shaheen, the letter was signed by U.S. Senators Ben Cardin (D-Md.), Michael Bennet (D-Colo.), John Fetterman (D-Pa.), Mark Kelly (D-Arizona), Peter Welch (D-Vt.), and Jon Ossoff (D-Ga.).
You can read the letter HERE.
As the former top law enforcement official in Nevada, Senator Cortez Masto has been a leading voice in the fight to protect consumers from fraud throughout her career. She sounded the alarm on increasing check fraud scams, which cost consumers more than $800 million last year. She introduced legislation to protect and support whistleblowers reporting wrongdoing to the Consumer Financial Protection Bureau, and her bipartisan legislation to deter disruptive and potentially harmful phone calls and texts was signed into law in 2020.