ERTC and Employee Retention Credit Fraud Defense Lawyer in Rhode Island

What Happens When the IRS Opens a Criminal ERTC Investigation

The Employee Retention Credit was designed to help businesses survive the pandemic. Billions were claimed. The IRS and Department of Justice have made clear that fraudulent claims will be prosecuted aggressively—and they are not distinguishing between the promoters who sold the schemes and the business owners who signed the forms. Cases prosecuted through the U.S. District Court for the District of Rhode Island follow the same aggressive posture seen in federal districts nationwide.

If you’ve been contacted by IRS-CI, received a grand jury subpoena, or learned that your tax preparer is cooperating with federal investigators, the decisions you make in the next few days will shape everything that follows. Our guide on what to do during a federal criminal investigation outlines the critical first steps.

Do not speak with investigators, return calls from federal agents, or produce documents without first consulting an attorney. What feels like cooperation often becomes the government’s strongest evidence. Silence is not obstruction. Silence is constitutional protection.

An experienced Rhode Island federal criminal defense attorney can immediately assess your exposure, determine whether you’re a target or a witness, and begin protecting your rights before the government locks in its narrative.

How Is ERTC Fraud Prosecuted in Federal Court?

Federal ERTC fraud prosecutions typically arise under statutes prohibiting false claims against the United States, tax fraud, wire fraud, or conspiracy. The specific charge depends on how the claim was submitted and who was involved.

What makes ERTC cases serious is not just the dollar amount—though large claims draw more scrutiny—but the willfulness requirement. The government must prove you knew the claim was false and submitted it anyway with intent to defraud. This is where many cases are won or lost.

The ERTC had complex eligibility rules that changed multiple times. Many legitimate businesses made claims in good faith based on advice from CPAs or promoters who assured them they qualified. A good-faith reliance on professional advice, even if that advice was wrong, can negate the willfulness element required for criminal conviction.

But the government will scrutinize everything: Did you review the claim before signing? Did you question eligibility? Did you receive warnings? Did you continue claiming credits after learning of problems? Did you provide false information to your preparer?

The difference between civil penalties—which can reach 75% of the credit plus interest—and criminal prosecution—which can mean years in federal prison—often comes down to what the evidence shows about your state of mind.

Federal Charges Often Filed Alongside ERTC Fraud

ERTC fraud rarely results in a single charge. Federal prosecutors in Rhode Island routinely stack multiple counts to increase sentencing exposure and pressure plea negotiations. Understanding the full scope of potential charges is critical to building an effective defense.

Wire fraud applies whenever an ERTC claim was submitted electronically—which virtually all were. Each electronic transmission can constitute a separate count carrying up to 20 years imprisonment. Because the ERTC was claimed through electronic payroll filings, wire fraud charges are almost always added to the indictment.

Federal conspiracy charges allow prosecutors to hold you responsible for the actions of co-conspirators—including promoters, accountants, or business partners who participated in the scheme. A single conspiracy count can carry penalties as severe as the underlying offense.

False statements to federal agents can arise if you spoke with IRS-CI investigators before retaining counsel. Even minor inaccuracies during an interview—statements you may not have realized were misleading—can become independent felony charges under 18 U.S.C. § 1001.

Tax evasion and filing false returns may be charged if the ERTC claims affected your business’s overall tax liability. These charges carry their own sentencing exposure independent of the fraud counts.

Money laundering charges can attach if the government argues that ERTC funds were moved through accounts to conceal their origin or used for purposes inconsistent with the credit’s stated purpose. Money laundering and bank fraud charges carry severe mandatory penalties.

In some cases, investigators executing search warrants related to ERTC fraud also uncover evidence leading to Rhode Island federal drug charges or felon in possession charges, adding entirely separate counts to an already complex indictment. The stacking of charges means that even a case involving a single ERTC claim can result in a multi-count indictment with aggregate sentencing exposure of decades. Each charge requires its own defense strategy, and weaknesses in one count do not automatically carry over to others.

Bail, Bond Hearings, and Pretrial Release in Federal ERTC Cases

Federal criminal cases operate differently than state cases. If you’re indicted for ERTC fraud, you’ll face an initial appearance in federal court in Providence, where a magistrate judge will consider whether to release you pretrial and under what conditions — our federal detention hearing defense team can prepare you for this critical stage.

In most federal white collar crimes defense cases, defendants are released on conditions—but those conditions can be substantial. You may face travel restrictions, surrender of passport, asset freezes, and prohibitions on contacting co-defendants or witnesses. If the government argues you’re a flight risk or that you’ve hidden assets, detention hearings become more contested. Understanding how bail works in federal court is essential to preparing for this stage.

What happens before indictment matters more. If you learn of an investigation early, an experienced defense attorney can sometimes engage with prosecutors during the investigation phase, present mitigating evidence, and argue against indictment before charges are ever filed. This is often the most valuable intervention in federal white collar cases—and a core focus of federal grand jury and pre-indictment defense representation.

Once indicted, discovery is extensive. The government will produce thousands of pages of bank records, payroll documents, emails, and tax filings. Managing this volume and identifying weaknesses in the government’s case requires systematic review from day one.

What Evidence Does the Government Use to Prove ERTC Fraud?

ERTC prosecutions are document-intensive. The government builds its case from records you may have signed, filed, or produced.

Payroll records form the foundation. The ERTC was based on wages paid during specific quarters, and the government will reconstruct every payroll cycle to determine whether claimed amounts matched actual payments. Discrepancies between claimed credits and documented wages are treated as evidence of fraud.

Bank records trace where the credit went after receipt. Did it go to legitimate business operations, or was it diverted? The government uses financial analysis to argue that recipients knew the money wasn’t earned.

Communications can be devastating. Emails with promoters, texts with employees, internal discussions about eligibility—all are discoverable. Statements like “we probably don’t qualify but let’s try” become exhibits at trial.

Third-party records are also critical. The government obtains records from banks, payroll processors, and accounting firms without your knowledge. By the time you learn of an investigation, investigators may already have a complete picture of the paper trail.

Cooperating witnesses often seal cases. Promoters facing their own exposure frequently cooperate against their clients. CPAs and accountants may be compelled to testify about what you told them.

The defense requires meticulous review of every document the government intends to use—and identification of documents the government overlooked that support good faith.

If evidence in your case raises questions about how the investigation was conducted, what was seized, or how statements were obtained, speak with an attorney who can evaluate your constitutional protections. Call Attorney Matthew Marin or Attorney Stefanie Murphy at (401) 228-8271 for a confidential consultation.

How a Federal Criminal Defense Lawyer Fights ERTC Fraud Charges

Defending ERTC fraud allegations requires more than familiarity with tax law. It requires command of federal criminal procedure, experience with complex document-intensive cases, and the judgment to know when to fight and when to negotiate.

Early case triage is essential. An experienced attorney reviews your exposure across all potential charges, identifies the strongest defenses, and assesses the strength of the government’s evidence before strategy is set. In some cases, the best outcome is achieved through early negotiation. In others, weaknesses in the government’s case justify preparing for trial from day one.

Investigation often uncovers what prosecutors missed. Defense counsel should review eligibility independently—not just accept the government’s characterization. Many ERTC claims were legitimate despite complexity. Others were filed based on reasonable interpretations that changed over time. An independent reconstruction of eligibility, supported by accounting analysis, can undermine the government’s fraud narrative.

Expert witnesses may be necessary. Forensic accountants can challenge the government’s damage calculations. Tax experts can explain the ambiguity in ERTC rules and the reasonableness of interpretations the government now calls fraudulent.

Motion practice matters. Constitutional challenges to search warrants, subpoenas, or interview procedures can suppress critical evidence. Challenges to the government’s legal theories can narrow charges or force dismissals.

Trial readiness shapes negotiations. Prosecutors evaluate defense counsel. If they believe you will take weak cases to trial and win, settlement offers improve. If they believe counsel will accept any deal to avoid trial, offers deteriorate.

Mitigation planning must begin early. Even in cases where conviction is likely, substantial prison sentences are not inevitable. Demonstrating cooperation, acceptance of responsibility where appropriate, restitution efforts, and personal circumstances can significantly affect sentencing under federal guidelines.

If you have already been convicted or sentenced in federal court, our federal post-conviction relief practice reviews whether grounds exist to challenge the conviction or sentence under 28 U.S.C. § 2255.

Why Experience in Serious Criminal Cases Matters for ERTC Defense

Federal ERTC prosecutions are high-stakes matters with life-altering consequences. Prison sentences in federal court are real. Restitution orders can exceed the original credit amount. Collateral consequences—professional licensing, business relationships, reputation—extend far beyond the courtroom.

Choosing counsel for a case like this requires evaluating whether your attorneys have handled serious matters under pressure, navigated complex evidentiary records, and achieved results in contested litigation.

Attorney Matthew Marin has built his practice on Fourth Amendment litigation and the defense of constitutional rights in criminal proceedings. His experience challenging the legality of searches, seizures, and government overreach translates directly to federal white collar cases, where the admissibility of documents, the validity of subpoenas, and the procedures used to obtain evidence are frequently contested. Marin’s suppression work—forcing the government to prove that every piece of evidence was lawfully obtained—is often the difference between a case that proceeds to trial and one that unravels before it gets there.

Attorney Stefanie A. Murphy has tried serious felony cases in Superior Court, including multi-day jury trials prosecuted by the Rhode Island Attorney General’s Office. She has secured acquittals in murder and firearm cases where co-defendants faced life sentences. She has handled post-conviction litigation involving complex forensic evidence, including DNA cases spanning decades. Her work has been recognized independently by the Providence Journal and Rhode Island Lawyers Weekly across multiple case types.

Together, their combined experience covers the full spectrum of what federal ERTC defense demands: constitutional challenges to the government’s evidence-gathering, meticulous document review across thousands of records, witness preparation, expert coordination, and the trial-ready posture that forces prosecutors to evaluate their case honestly. Business owners facing federal investigation need attorneys who have faced high-stakes pressure before—not attorneys encountering it for the first time with their case.