How Can Businesses Prepare for an IRS Review of ERTC Claims?

October 26, 2023
Dayes Law Firm

An upswing in false ERTC claims has led the IRS to begin auditing certain business owners who claimed this credit. If you filed for the ERTC, you should be prepared for an audit on the off chance the IRS flags your claim. Here’s what businesses can do to prepare for a potential IRS review of their ERTC claims.

Keep Organized Records

Recent ERTC scams have convinced some business owners that they qualify for the ERTC when they really do not. In September, the IRS announced “an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program” as a result of increased fraud concerns. 

The ERTC has a few strict eligibility guidelines, such as:

  • Your business’s operations were fully or partially suspended due to government orders in 2020 or 2021
  • You experienced a significant decline in gross receipts

Additionally, the wages you can claim vary depending on whether your business is considered a “small” or “large” business under ERTC guidelines. 

If the IRS were to audit your business or review your ERTC claim, you would need detailed records showing that you meet all the eligibility requirements. You would also need to show that the credits you claimed accurately reflect your employee wages. 

Organizing your records now can help you prepare for a potential audit. The two primary sets of documents you should organize include:

  • Your calculation of gross receipts for every quarter between Q1 2019 and Q3 2021
  • Documents showing the number of eligible employees in your business and their qualified wages 

Understand How the IRS Will Contact You

Scammers like to impersonate the IRS and scare taxpayers into paying fees they don’t actually owe. Because of this, business owners should also prepare for a potential IRS review of their ERTC claims by understanding how the IRS would notify them of a review. 

The IRS will never contact you by phone or show up at your door. Instead, its first communication would be an Information Document Request (IDR) that the agency sends to you through the mail. The IRS would ask you to provide further information or send specific documents to support the information you gave on your tax returns. 

If the IRS ever contacts you by phone, you should assume it is a scam. Hang up, and then call the IRS’s direct phone number to verify the request. You may also want to seek legal counsel to review any communications the IRS sends you and better understand how to proceed. 

Work With ERTC Tax Experts 

Filing an ERTC claim without any professional assistance is risky. You may miscalculate your credits or misunderstand which employee wages are eligible. While these are honest mistakes, they open the door to tax penalties and future suspicions from the IRS. 

Instead, working with a tax attorney throughout your entire filing process can help you better prepare for a potential audit. Your tax attorney can review your employment records and accurately calculate your tax credits. They can also organize your documentation and ensure easy access to any additional information the IRS may request. 

Even if you claim the Employee Retention Tax Credit correctly, the IRS may still randomly choose your business for an audit. Having an experienced tax attorney on your side means you can stress less about an IRS review. 

Dayes Law Firm: Your ERTC Tax Attorneys 

At Dayes Law Firm, we’re committed to helping small businesses maximize their tax credits through the ERTC and other programs, like Paycheck Protection Program (PPP) loan forgiveness. We help businesses prepare for a potential IRS review of their ERTC claims by checking the accuracy of their calculations and representing them in all IRS communications. 

For committed ERTC help, contact Dayes Law Firm today at 866-875-1005 or fill out our online form.