What Should I Do if the IRS is Auditing My ERTC Claim?

The Employee Retention Tax Credit (ERC) is a refundable tax credit that employers can claim for qualified wages and health insurance premiums paid to employees during the COVID-19 pandemic. The ERC can be a significant financial windfall for businesses, but it is important to note that the IRS is actively auditing ERC claims.

If you receive a notification that your ERC claim is being audited, it is important to take action immediately. Here are some steps you should take:

  1. Gather all relevant documentation. This includes your ERC worksheet, payroll records, and any other documentation that supports your claim.
  2. Review your ERC worksheet carefully. Make sure that all of the information is accurate and that you have followed the ERC guidelines correctly.
  3. Contact a tax attorney. A tax attorney can help you navigate the audit process and protect your interests.

ERTC Scams and Fraud Prompt IRS Crackdown

The Employee Retention Tax Credit (ERC) is a valuable tax credit that was created to help businesses during the COVID-19 pandemic. However, the prevalence of ERC scams and fraud has caused the IRS to crack down on ERC claims.

There are a number of different types of ERC scams. For example, some scammers may offer to help businesses file ERC claims for a fee, but they may not actually file the claims or they may file fraudulent claims. Other scammers may sell businesses fake ERC refund checks.

ERC fraud is also a problem. Some businesses may intentionally file fraudulent ERC claims by claiming the credit for wages that are not qualified wages or by calculating the credit amount incorrectly.

The IRS has taken a number of steps to crack down on ERC scams and fraud. The IRS has issued warnings to businesses about ERC scams and has increased its enforcement efforts. The IRS has also created a special task force to investigate ERC fraud.

The IRS crackdown on ERC claims is having a significant impact on businesses. The IRS is auditing more ERC claims than ever before, and businesses that are found to have filed fraudulent claims are being required to repay the credit and may also be subject to other penalties.

How to Avoid ERC Scams and Fraud

There are a number of things that businesses can do to avoid ERC scams and fraud:

  • Be wary of anyone without credentials who offers to help you file an ERC claim for a fee.
  • Do not pay anyone to file an ERC claim on your behalf unless you are certain that they are a reputable tax professional.
  • Be careful about clicking on links in emails or text messages that claim to be about the ERC.
  • Do not give out your personal or financial information to anyone who claims to be from the IRS.
  • Only file an ERC claim if you are certain that you are eligible for the credit.
  • Carefully calculate your ERC credit amount.
  • Keep good records to support your ERC claim.
  • If you face an ERC audit, bring in a tax professional to assist with the process.

Impact of the IRS Crackdown on ERC Claims

The IRS crackdown on ERC claims is having a significant impact on businesses. Businesses are now more likely to be audited for their ERC claims, and businesses that are found to have filed fraudulent claims are being required to repay the credit and may also be subject to other penalties.

The IRS crackdown on ERC claims is also making it more difficult for businesses to claim the credit. The IRS is now requiring businesses to provide more documentation to support their ERC claims.

Overall, the IRS crackdown on ERC claims could also be seen as a positive development. It is important to deter ERC scams and fraud to protect the integrity of the ERC program. However, the IRS crackdown is also making it more difficult for businesses to claim the credit.

Frequently Asked Questions from Businesses Regarding IRS Audits of their ERC Claim

Q: What are the most common reasons why the IRS audits ERC claims?

The most common reasons the IRS audits ERC claims include:

  • Mathematical errors
  • Inaccurate reporting of qualified wages
  • Failure to meet the eligibility requirements
  • Suspected fraud

Q: What should I do if I receive a notification that my Employee Retention Tax Credit claim is being audited?

The first thing you should do is gather all relevant documentation and review your ERC worksheet carefully. You should also contact a tax attorney to discuss your case.

Q: What can I expect during an IRS audit of my ERC claim?

The IRS will review your documentation and ask you questions about your ERC claim. They may also request additional information. It is important to be cooperative and to answer all of the IRS’s questions honestly.

Q: What are the consequences if I fail to comply with an IRS audit of my ERC claim?

If you fail to comply with an IRS audit, you may be subject to penalties and interest. The IRS may also disallow your ERC claim, which would mean that you would have to repay the credit.

Q: Can I negotiate with the IRS during an audit of my ERC claim?

Yes, you can negotiate with the IRS during an audit. Your tax attorney can help you negotiate with the IRS on your behalf.

Q: What should I do if the IRS disallows my ERC claim?

If the IRS disallows your ERC claim, you can file an appeal. Your tax attorney can help you file an appeal and represent you at the appeal hearing.

Q: What are the recent IRS news and developments regarding ERC audits?

On September 14, 2023, the IRS announced a moratorium on new ERC audits. The moratorium stands to last until at least December 31, 2023. The IRS is also reviewing its ERC audit procedures and will be providing more guidance to taxpayers in the near future.

Q: What should I do if I am concerned about my ERC claim being audited?

If you are concerned about your ERC claim being audited, you should review your documentation carefully and make sure that you have followed the ERC guidelines correctly. You should also contact a tax attorney to discuss your case.

Q: What should businesses do if they have already filed an ERC claim?

Businesses that have already filed an ERC claim will need to be patient while the IRS processes their claim. The IRS stated that it is prioritizing the processing of existing claims, but it may take up to 180 days or even longer for claims to be processed.

Q: What are the benefits of having a tax attorney represent me during an IRS audit of my ERC claim?

A tax attorney can help you navigate the audit process and protect your interests. They can also negotiate with the IRS on your behalf and represent you at the appeal hearing if necessary.

Implications of the New IRS Moratorium on ERC Claim Filings

The IRS moratorium on ERC audits is slated to last until at least December 31, 2023. During the moratorium, the IRS will not initiate new ERC audits. However, the IRS will continue to process existing ERC audits and will investigate suspected fraud.

The IRS is reviewing its ERC audit procedures and will be providing more guidance to taxpayers in the near future. Taxpayers are encouraged to monitor the IRS website for updates.

How Can a Tax Attorney Assist with an IRS ERC Audit?

The ERC is a complex tax credit, and there are many rules and regulations that businesses must follow to be eligible for the credit. A tax attorney can help businesses review the paperwork that was filed to determine if everything was done properly.

In addition, a tax attorney can help businesses discern common ERC mistakes, such as claiming the credit for wages that are not qualified wages or calculating the credit amount incorrectly.

Here are some other benefits of hiring a tax attorney to help if your ERC claim is being audited:

  • Tax attorneys have the knowledge and experience to help you navigate the complex ERC rules and regulations.
  • Tax attorneys can help you identify any inappropriate wages that you may have claimed for the ERC.
  • Tax attorneys can help you double check your ERC calculations.
  • Tax attorneys can represent you in the event that you are audited by the IRS for claiming the ERC.

If your ERC claim is being audited, it is important to take action immediately. Gather all relevant documentation, review your ERC worksheet carefully, and contact a tax attorney to discuss your case. A tax attorney can help you navigate the audit process and protect your interests. If you are concerned about an IRS audit, contact Levy & Associates, Inc., today at 800-TAX-LEVY. We have years of experience defending clients through the IRS audit process.