Amid a surge of fraudulent and inaccurate applications for the Employee Retention Tax Credit (ERTC), the IRS has issued several warnings to taxpayers. The federal agency has told businesses to look out for con artists making assurances that seem too good to be true, offering to determine their eligibility without reviewing any ERTC documentation, or encouraging them to apply for credits they may not even qualify for.

As part of the larger effort to protect businesses from these scams, the IRS also announced that taxpayers who filed potentially incorrect ERTC claims may now withdraw them without penalties or interest. Whether you want to amend a previous claim or are seeking to file one for the first time, it is essential to know and follow the required IRS documentation for ERTC.

If you would like more information about employee retention tax credit documentation, the ERC attorneys at Dayes Law Firm can help. Here is what you need to know about the required paperwork for creating an effective ERTC claim.

Who Qualifies for the ERTC?

If your company kept payroll on staff during the pandemic, you may qualify to claim the ERTC if you also meet the following criteria:

  • Your business suffered a full or partial suspension of operations due to COVID-19-related government orders in 2020 or 2021. This could involve government shutdowns, mandated curfews, social distancing rules, inability to meet with customers, or disruptions in your supply chain.
  • Your company’s gross receipts declined significantly — 50% or more for 2020 or 20% or more for 2021 — for pandemic-related reasons.  

What ERTC Documentation Does My Business Need?

Proper ERTC record-keeping is essential to filing your claim, amending your claim, and having your claim ready in case of an audit. ERTC claim evidence can include the following:

  • Form 941/941-X: the Employer’s Quarterly Federal Tax Return and the amended return used to correct mistakes on the previously filed form. 
  • Copies of the state or local COVID-19 order that caused you to partially or completely suspend operations. 
  • Records that show a significant decline in business revenue during the quarters in question. 
  • Detailed payroll records, including employees’ names, pay dates, and gross wages. You will also want to have documentation about your participation in the Paycheck Protection Program (PPP) and about your employees’ qualified wages and healthcare expenses.

Is It Too Late to File or Fix My ERTC Application?

If you have not yet applied for the ERTC but think your business may qualify, it is not too late. You can file an amended tax return up to three years after the qualifying period in 2020 or 2021. Because the IRS considers employment tax returns filed on April 15, you have until April 15, 2024, to file adjusted tax returns for 2020 and until April 15, 2025, to file adjusted tax returns for 2021.

If you believe you erroneously filed an ERTC claim, the IRS is now allowing you to withdraw it without penalties or interest. If you’d like to correct your claim without withdrawing it, you can also do so by filing an amended tax return. However, you can only take this route if you have not yet cashed or deposited your refund check (or the IRS has not yet issued it).Whether you wish to file a new claim or amend an existing one, proper ERTC documentation is key. If you would like help documenting ERTC eligibility, filing or amending an application, or dealing with an IRS audit of your claim, contact the tax credit professionals at Dayes Law Firm. Call us anytime at 800.503.2000 for a free ERTC consultation.