How to Handle IRS Inquiries Related to the ERC Claims

August 11, 2023
Dayes Law Firm

The IRS previously warned that the agency would be pursuing audits of businesses that might have applied for the Employee Retention Credit without meeting important eligibility requirements. Unfortunately, some business owners who did everything right could still end up being audited. But there are ways to be prepared to handle IRS inquiries related to ERC claims – you’ve just got to be proactive when you apply for the tax credit in the first place. 

How to Handle ERC IRS Inquiries 

The application process to claim the ERC does have some complex documentation involved, and you don’t want to be on the wrong side of the IRS for turning in anything incorrect when applying for this important tax credit. 

The IRS has warned that “improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest,” which no business owner wants to deal with, especially after all of the economic uncertainty that came with doing business during COVID-19.

But by taking a few precautions, you should be able to handle any IRS inquiries related to ERC claims with ease. So if you do receive from the IRS about an audit, particularly one with an Information Document Request (IDR) – stay calm. If you went through every step of the Employee Retention Credit process correctly, you should have nothing to worry about. 

IRS Inquiry Documentation 

The IRS will most likely be concerned with whether or not you even qualified for the ERC and how much you claimed in an ERC refund. Specific documentation can help you prove both of those things.

You may be asked to provide documentation about your ERC eligibility, including the governmental orders that suspended your business operations. Whatever records you may have of the company’s substantial decline in gross receipts and information on your full-time equivalent employees and their qualified wages may be requested, too. Payroll records, employment tax returns, and more could be included in the request for information. 

Any discrepancies in the paperwork could prove to be a red flag to the IRS. That’s just one reason many businesses have turned to tax professionals that can help with applying for the ERC, like the team at Dayes Law Firm. A tax attorney skilled in applying for the credit will have a better idea of exactly what you need to apply, and what pitfalls to avoid to hopefully keep the IRS from pursuing an audit.

Assistance With ERC Audits

As long as you can provide any documentation the agency seeks, you should be well-equipped to handle any IRS inquiries related to the ERC. And if you do end up facing an audit, a reputable tax professional can help. 

At Dayes Law Firm, our skilled tax professionals can help you navigate the IRS audit process. We can assist with an ERC audit defense as needed, and we will defend any businesses with an ERC audit – or if there is ever a request for an audit in the future – if we had previously assisted that business with their Employee Retention Credit application. 

Please feel free to contact us for a no-obligation consultation with one of our team members to see how we can help you and your business. Call us at 602-888-2900 or fill out the form on this page to get in touch.