The Internal Revenue Service warned taxpayers Tuesday to review Employee Retention Credit guidelines carefully before trying to claim the credit. It cited third parties encouraging people to claim the credit despite being ineligible for it as a reason for the warning.

Many third parties are aggressively promoting these credit schemes on the radio and online in the middle of tax season. Many of the companies either charge large upfront fees or a fee that varies based on the amount of one's tax refund, according to a news release from the IRS.

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"While this is a legitimate credit that has provided a financial lifeline to millions of businesses, there continue to be promoters who aggressively mislead people and businesses into thinking they can claim these credits," acting IRS Commissioner Doug O'Donnell said.

"Anyone who is considering claiming this credit needs to carefully review the guidelines," O'Donnell said. "If the tax professional they're using raises questions about the accuracy of the Employee Retention Credit claim, people should listen to their advice. The IRS is actively auditing and conducting criminal investigations related to these false claims. People need to think twice before claiming this."

The Employee Retention Credit is defined by the IRS as a refundable tax credit intended for businesses that either continued paying employees while shut down during the COVID-19 pandemic or had significant declines in gross receipts between March 13, 2020, and Dec. 31, 2021. Taxpayers who are eligible to claim this credit can do so on an original or amended employment tax return for a period within those dates.

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The IRS has been warning taxpayers of these third-party promoters since fall of last year. Despite this, these promoters continue to persist as many taxpayers are filing or have yet to file their 2022 taxes.

If a taxpayer improperly claims this credit, it could result in the taxpayer being required to repay the credit along with penalties and interest.