ERC Fraud Defense Attorney
The Department of Justice has made Employee Retention Credit fraud a top prosecution priority. Businesses that claimed the ERC improperly — even those misled by promoters — are being investigated, audited, and in many cases indicted. If your ERC claim is under scrutiny, you need a criminal tax attorney now.
The IRS has flagged over $2 billion in fraudulent ERC claims. DOJ Task Force cases are active in every federal district.
What Is the Employee Retention Credit — and Why Is It Now a Criminal Issue?
The Employee Retention Credit (ERC) was a refundable payroll tax credit created under the CARES Act to help businesses retain employees during the COVID-19 pandemic. Eligible businesses could claim up to $26,000 per employee — making it one of the largest COVID relief programs in American history.
The problem: the ERC eligibility rules were complex, the IRS guidance was inconsistent, and a massive cottage industry of "ERC mills" and promoters emerged to help businesses claim the credit — often aggressively and, in many cases, fraudulently. The IRS estimates that a significant portion of claims filed after mid-2021 were improper.
The DOJ and IRS have responded with aggressive enforcement. The IRS has issued thousands of disallowance notices, clawed back billions in credits, and referred hundreds of cases to Criminal Investigation. DOJ prosecutions include promoters who fabricated eligibility, business owners who inflated employee counts, and companies that double-dipped by applying the same wages to both PPP forgiveness and the ERC.
You do not have to be a fraudster to be investigated.Businesses that received the ERC in good faith — based on a promoter's eligibility determination they did not fully understand — are under scrutiny. The earlier you engage defense counsel, the more options you have.
Are You at Risk? ERC Red Flags
Any of these factors increases your risk of investigation. Multiple factors together significantly elevate risk.
Used an ERC promoter or third-party filing company
Promoter-assisted claims are the #1 DOJ target. Even if you paid them a percentage of your credit and believed everything was legitimate, the IRS may argue you should have known better.
Claimed ERC based on revenue reduction you are unsure about
Ambiguous eligibility — especially around the 20% or 50% gross receipts decline thresholds — is one of the most common areas where legitimate claims can be recharacterized as fraudulent.
Received an IRS ERC disallowance notice or audit letter
A civil disallowance can escalate to a criminal referral if the IRS believes the original claim was fraudulent. Early defense representation in the civil phase often prevents criminal referral.
Claimed ERC while also receiving PPP loans for the same wages
Double-dipping — applying the same wages to both PPP forgiveness and the ERC — was a common mistake and is specifically cited in DOJ prosecutions.
Claimed ERC for a business that did not qualify under government order tests
Many businesses claimed ERC based on partial suspension arguments that were rejected by the IRS. The government is treating aggressive interpretations as fraud in some cases.
Claimed ERC for employees who were not actually retained or working
Fabricating employee counts, inflating wages, or claiming ERC for workers who were laid off rather than retained is straightforward fraud and the easiest case for the DOJ to prosecute.
Your Defense Options
Defend the Claim
If your ERC was legitimately claimed, we build the documentation case — government order analysis, gross receipts calculations, eligible employee records — and fight the IRS disallowance aggressively.
ERC Voluntary Disclosure
The IRS ERCVDP allows repayment of improper credits at 80% with no penalties. Used strategically under attorney guidance, this can resolve civil liability and reduce criminal exposure before an investigation escalates.
Criminal Defense
If you are already under CI investigation, we engage with the DOJ Tax Division to present your good-faith reliance defense, challenge the government's fraud theory, and pursue dismissal or negotiated resolution.
ERC Fraud Defense — Frequently Asked Questions
I claimed the ERC through a third-party company. Am I criminally liable even if I thought it was legitimate?
Potentially, yes. The IRS and DOJ have been clear: signing a tax return makes you responsible for its contents, even if a preparer filed it. However, a good-faith reliance defense — showing you reasonably relied on the promoter's representations — is a real and viable defense. The key is documenting that reliance thoroughly and acting before a criminal referral is made. Do not wait.
My business already received an ERC disallowance letter. Is this criminal?
A disallowance is a civil matter — not criminal. However, it can escalate. If the IRS believes your claim involved fraud (not just an error), they can and do refer cases to Criminal Investigation. The best protection against escalation is having experienced counsel manage the civil dispute from the start.
The IRS is asking me to repay my ERC. Should I just pay it back?
Not necessarily — not without understanding your full situation first. Some ERC claims are legitimate and worth defending. Others warrant repayment under the IRS Voluntary Disclosure Program (ERCVDP), which can cap your liability at 80% repayment with no penalties. And in cases where criminal exposure exists, paying back on your own without counsel may not resolve the underlying criminal risk. Consult a criminal tax attorney before making any payments.
What is the ERC Voluntary Disclosure Program?
The IRS created a specific ERC Voluntary Disclosure Program (ERCVDP) allowing businesses to return improper ERC payments at a reduced amount (typically 80% of the credit received) with no penalties. This program has limited availability and is not a shield from criminal prosecution in all cases — but when properly used under attorney guidance, it can be a powerful tool to resolve civil liability while protecting against criminal referral.
Can I go to prison for filing an improper ERC claim?
Yes. The DOJ has already secured prison sentences and indictments for ERC fraud. Sentences have ranged from probation to several years in federal prison. The severity depends on the amount involved, whether you knowingly participated in fraud, and the strength of your defense. The best outcomes are achieved by engaging criminal defense counsel early — before charges are filed.
How do I know if I am under criminal investigation for ERC fraud?
Signs include: IRS special agents visiting your home or business, a letter from IRS Criminal Investigation (not collections), a DOJ or FBI contact, a federal grand jury subpoena, or your ERC promoter being indicted or under investigation. In some cases, you will not know until charges are filed — which is why proactive engagement is critical if you have any reason to believe your claim may have been improper.
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