How to Prepare for IRS Scrutiny with ERTC Compliance

November 1, 2023
Dayes Law Firm

The IRS recently announced that the agency has put in place a moratorium on the processing of new Employee Retention Tax Credit (ERTC/ERC) claims through the end of the year thanks to concerns about possibly fraudulent applications. The agency is also looking more closely at applications that have already been received. How can businesses prepare for this potential IRS scrutiny in regard to ERTC compliance? 

How Should Businesses Prepare for Potential IRS Scrutiny When It Comes to ERTC Compliance? 

In July, IRS Commissioner Danny Werfel said the IRS was shifting away from clearing the backlog of valid ERTC claims. The IRS is approaching “increased audit and criminal investigation work on these claims” with heightened aggression.

Then, in mid-September, the agency 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 worries. 

IRS Commissioner Danny Werfel noted in the announcement, “The IRS is increasingly alarmed about honest small business owners being scammed by unscrupulous actors, and we could no longer tolerate growing evidence of questionable claims pouring in.” He added that when it comes to claiming the ERTC, “businesses should seek out a trusted tax professional who actually understands the complex ERC rules.”

If you’re concerned about your ERTC application getting swept up in the chaos and dealing with potentially increased IRS scrutiny, there are ways you can prepare for that possibility. 

Having strong documentation of your ERTC eligibility is part of being ready for any possible IRS inspection. If all of your records are well-documented and organized – from payroll records, to which wages qualify for the tax credit, to proof of the impact of government shutdowns and regulations on your business operations – you shouldn’t raise any red flags with the agency. 

The more information you send to the IRS with your application, the better, but you can also prepare for potential IRS scrutiny by having any and all ERTC-related information ready to go if they ask for more documentation later. Staying organized could save you later if you face something like a dreaded IRS audit

ERTC Application Assistance 

Business owners can also protect themselves from the IRS possibly probing their ERTC applications more closely by working with a team of tax professionals on their Employee Retention Tax Credit claim. 

The team at Dayes Law Firm, for instance, has assisted businesses in filing for over $250 million in tax credit claims and our clients have already received over $25 million in funds for ERTC claims. We are skilled in helping businesses with every step of the process and know all of the documentation the IRS will be looking for.

More importantly, if the IRS does ask for more information or you get caught up in an IRS audit, we can help. We will defend any businesses with an ERTC audit or if there is ever a request for an audit in the future, giving you a leg up over businesses that turn in an ERTC application without a strong audit defense if it’s needed. 

Please call our firm at (800) 503-2000 to learn more! We can offer a free, no-obligation consultation and discuss the unique needs of your business. We would be more than happy to answer any questions you might have about the ERTC and the IRS’ current moratorium. Please don’t hesitate to contact us today to see how we can best assist you and your business!