ERC Audits: What to Expect and How to Prepare

The Employee Retention Tax Credit (ERC/ERTC) is a refundable payroll tax credit that has been a lifesaver for a lot of businesses. It has provided a great deal of economic relief to eligible employers – offering up to $26,000 per W2 staff employee. However, although many employers may qualify for the credit, the application process is not without some complexity, and there is a chance that a business applying for the credit could end up dealing with an ERC audit from the IRS.

What to Expect from an ERC Audit

The IRS has warned that “improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.” No business wants to contend with an IRS audit, but knowing what it entails can help you be prepared if you end up in that unfortunate position as a business owner. 

If you do face an ERC audit, you will likely first receive notice of the audit. A letter you’d receive from the IRS about such an audit might include an Information Document Request (IDR) – a request for information in the form of documents that you will need to provide to verify your ERC claim.

You will likely be asked for documentation about your ERC eligibility, including the governmental orders that suspended your business’ operations, any records of its significant decline in gross receipts, information on your full-time equivalent employees and their qualified wages, and more. 

The IRS will probably ask for any relevant federal employment tax returns, among other documentation about your ERC claim. The IRS has already started auditing Employee Retention Credit claims, so you should be sure to have copies of all of that documentation ready just in case. 

How to Prepare for an ERC Audit

If the IRS audits you and your business, don’t panic. As long as you have all of your paperwork and information in order, you’re already one step ahead and will be able to provide any documentation the agency seeks.

You can also reach out to tax professionals that understand the ERC program for assistance if you’re facing an ERC audit. Our team can help defend you if you find yourself audited by the IRS. We offer a free consultation on any of your Employee Retention Tax Credit questions, including any concerns you may have regarding an audit. 

Dayes Law Firm and our partners can help you collect the information you need for the audit and respond to the IRS in a timely manner. We have proudly assisted many businesses with their ERC applications already and are more than prepared to assist with ERC audit defense as needed. 

Call us today for a free evaluation! Our tax attorneys are ready to help businesses claim the ERC funds they’re entitled to, and assist with any audit-related concerns when it comes to this important tax credit. 

Contact us for a no-obligation consultation and see how the Dayes Employee Retention Credit team can help you defend your business against an ERC audit.