Chicago ERC Fraud Lawyers

Chicago ERC Fraud Lawyers

The envelope arrived at your Chicago business. IRS Letter 6612 – Employee Retention Credit audit notification. Thirty days to respond with documentation proving your ERC claim was legitimate, or face denial, repayment demands, and potential criminal investigation. Or perhaps the letter didn’t come at all – instead, IRS Criminal Investigation agents contacted you directly, asking questions about the $180,000 ERC claim your business filed in 2021 through that promoter who promised “easy money” and charged 25% of whatever you received. Here’s what actually happens next in your situation – the timeline you’re facing right now, the choices you have that most Chicago businesses don’t know exist, and when this escalates from civil repayment to federal criminal prosecution.

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek. We’ve represented clients in federal fraud investigations for over 40 years, including cases where regulatory complexity made compliance nearly impossible, then prosecutors weaponized that complexity into criminal charges. This article explains what happens to YOU in a Chicago ERC investigation, organized by your actual journey through the system, not abstract legal topics.

You Have 30 Days

Letter 6612 starts a clock that determines everything. You have 30 days to respond with documentation proving your business qualifies for the Employee Retention Credit under IRS eligibility requirements, or the IRS denies your claim and demands full repayment. Included with Letter 6612 is Form 4564, Information Document Request – 13 multi-part questions designed to assess whether your claim was legitimate. These aren’t simple yes/no questions – they demand detailed calculations, quarterly gross receipts breakdowns, and proof that government-mandated shutdowns or capacity restrictions substantially impacted your operations. The 30-day timeline determines everything that follows. Respond incorrectly, you trigger criminal referral flags in IRS systems. Miss the deadline entirely, the agency assumes fraud. Days 1-10: gather every document – payroll records, PPP loan applications, quarterly gross receipts for 2019 through 2021, government orders that affected your Chicago business operations. Days 11-20: answer those 13 questions on Form 4564 – but here’s the constitutional problem: your answers can become criminal evidence if the IRS later alleges you knew your claim was fraudulent. Days 21-30: submit your response, or decide not to respond at all if criminal exposure seems too high. Consider a Chicago restaurant owner who received Letter 6612 in March 2025. His promoter had claimed $180,000 based on “supply chain disruption” – a category that doesn’t qualify under ERC rules. He responded without consulting counsel, explaining in detail how ingredient shortages affected his business throughout 2020 and 2021. The IRS denied the claim, demanded full repayment plus 20% accuracy penalties. Worse – his detailed explanation about supply chain shortages, which he thought helped his case, went into an IRS file that could support a false claims prosecution if the agency later alleges he knew supply chain issues didn’t qualify for ERC. The trigger question determining your next move: do you respond yourself, or hire federal defense counsel immediately? If your claim exceeds $100,000, if your promoter is under investigation, if gross receipts calculations involved questionable methodology – you need a federal defense attorney before submitting anything to the IRS. The Fifth Amendment protects against self-incrimination for exactly this scenario: when civil audit responses become criminal prosecution evidence.

The IRS Voluntary Disclosure Program offers a decision point most Chicago businesses don’t know exists. Pay back 85% of what you received, IRS closes the case. No penalties, no interest, no criminal investigation.

When Does This Become Criminal?

The line between IRS civil audit and IRS Criminal Investigation determines whether you’re facing repayment or federal prison. Most Chicago businesses receiving Letter 6612 are in civil audit status – the IRS questions claim validity but hasn’t alleged intentional fraud. Civil audit means: provide documentation, IRS makes determination, if denied you owe repayment plus penalties. Timeline: 6-18 months. Cooperation generally makes sense in civil audit because there’s no criminal exposure yet. Criminal investigation begins when IRS-CI (Criminal Investigation division) takes over your case – and this happens when audit findings suggest intentional fraud rather than mere error. IRS-CI opened 493 ERC investigations in fiscal year 2024, covering $5.5 billion in potentially fraudulent claims nationwide. Those aren’t random audits – they’re criminal investigations conducted by special agents who have arrest authority. What triggers escalation from civil to criminal? Falsified gross receipts documentation. ERC claims filed for businesses that didn’t exist during qualifying quarters. Related-party transactions designed to manufacture eligibility. Promoter schemes where you knew the methodology violated ERC rules but proceeded anyway. The IRS looks for intent – did you make a good-faith error, or did you knowingly file a fraudulent claim? In January 2025, the Department of Justice announced its largest ERC fraud indictment: seven defendants charged with obtaining over $44 million through fraudulent claims filed for thousands of businesses. The indictment alleges defendants fabricated eligibility, falsified documentation, and coached business owners to provide false information to the IRS. Those business owners – even if they delegated everything to promoters – face potential prosecution as co-conspirators if they signed forms knowing the information was false. If IRS-CI contacts you, everything changes. Special agents aren’t auditors reviewing paperwork – they’re federal law enforcement building a criminal case. At that point, the constitutional protections that seem abstract in civics class become immediately practical: Fifth Amendment right against self-incrimination, Sixth Amendment right to counsel. Most federal defense attorneys will tell you: once IRS-CI is involved, you assert your Fifth Amendment rights and speak only through counsel. Cooperation that helps resolve civil audits destroys you in criminal investigations.

Prison Time

Federal ERC fraud prosecutions rely on three statutes: wire fraud (18 USC 1343), which carries up to 30 years in federal prison; false claims (18 USC 287), which carries up to 5 years; and conspiracy, which matches the underlying offense. Those statutory maximums terrify defendants – prosecutors use that fear to extract guilty pleas. But here’s what actually happens: recent prosecutions result in 24-36 month sentences, not decades. Federal guidelines calculate prison time based on loss amount, acceptance of responsibility, and criminal history. A $200,000 fraudulent claim might yield 18-24 months. Cooperation reduces sentences; trial convictions increase them.

Federal convictions destroy professional licenses, business reputations, government contracts, and family stability in ways that outlast the actual prison sentence. The constitutional question defense attorneys argue: where’s the line between mistake and fraud? The government must prove intent to defraud. If your promoter provided false information and you reasonably relied on their supposed expertise, that’s a defense – not an excuse. Criminal law requires mens rea, guilty mind. Zealous advocacy forces the government to prove you knew the claims were false when filed, not that you relied on professional guidance later determined incorrect.

At Spodek Law Group, we’ve defended clients in federal fraud investigations where government complexity made compliance nearly impossible, then prosecutors weaponized that complexity into criminal charges. Many, many, years of experience taught us this: the government bears the burden of proving fraud beyond a reasonable doubt, and that burden is heavy. Call 212-300-5196.