Following an announcement from the Internal Revenue Service (IRS) acknowledging concerns over third-party vendors promoting improper Employee Retention Credit (ERC) claims, the American Institute of CPAs applauded the announcement and new reporting process as a positive step by the IRS. The form - Form 3949-A, Information Referral – will provide a vehicle for individuals, firms and CPAs to anonymously report questionable ERC mills. The form has been previously available for use to anonymously report fraud and has now been earmarked to report ERC fraud as well.

The ERC was established nearly three years ago as part of a larger COVID-19 relief package in an effort to help businesses pull through the pandemic. More recently, the AICPA has heard from members concerned with the rise of non-CPA ERC vendors taking inappropriately aggressive positions. These vendors submit claims on behalf of businesses that are either unknowingly unqualified or qualified for a much smaller credit, charging upfront contingency fees of up to 25 percent of the claimed credit. These claims, if audited by IRS, could result in drastic reductions to the improperly obtained credits, costing the business significantly.

“For more than a year, the AICPA has communicated its concerns to the IRS and the Department of the Treasury regarding the unscrupulous business practices of ERC mills, and we are encouraged by this acknowledgement by the IRS of these questionable business practices around the ERC,” said AICPA President and CEO, Barry Melancon, CPA, CGMA. “This credit has been hugely beneficial to countless businesses that struggled to navigate the challenges brought on by the pandemic, and CPAs have often advised clients and business owners against taking the improper recommendations of these third-party vendors. We are pleased that employers and others now have a mechanism to anonymously report bad actors and help to protect the public against them.”

To report tax-related illegal activities relating to ERC claims, submit Form 3949-A, Information Referral. You should also report instances of fraud and IRS-related phishing attempts to the Treasury Inspector General for Tax Administration at 800-366-4484.

About the American Institute of CPAs

The American Institute of CPAs® (AICPA®) is the world’s largest member association representing the CPA profession, with more than 421,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.