How to Respond to an ERTC Audit Notice

November 16, 2023
Dayes Law Firm

The government introduced the Employee Retention Credit (ERC), also known as the Employee Retention Tax Credit (ERTC), to support businesses throughout the pandemic. To be eligible for the credit, employers needed to experience a significant decline in gross receipts or a partial or total suspension of operations.

Unfortunately, not everyone who claimed the credit did so honestly. Some businesses don’t meet the eligibility criteria, which has led to increased IRS audits.

Preparing for an ERTC audit defense can seem intimidating. Dayes Law Firm explains more about this process so you can proceed with confidence.

The IRS Is Cracking Down on ERTC Scams

Some businesses intentionally make fraudulent ERTC claims. Others, however, were led astray by promoters making inaccurate promises about the credit. Many such promoters charged large upfront fees, made inaccurate claims about how much business could pursue, and neglected to inform businesses they needed to amend tax forms. The IRS has taken an aggressive approach to addressing this issue, increasing the amount of audits for ERTC claims to prove legitimacy.

What Might Lead to an Audit?

The IRS may issue an audit if they notice any red flags, such as:

  • Incorrect or incomplete information
  • Discrepancies between information on your form and pre-existing documentation
  • Excessive ERTC claims

In addition, if you have a history of non-compliance with tax regulations, the IRS may be more likely to audit your business.

What To Do If Your Business Receives an Audit Notification

An ERTC audit notification may be frightening, but it’s important to stay calm. Read your notice carefully, gather any necessary information, and speak with an attorney to request assistance.

Follow the Instructions in the Notification

The notification should arrive at the last mailing address you had on record. The letter should contain information on the audit’s scope, the auditor you should contact, the audit’s time frame, and instructions for responding.

You may face one of three different types of IRS audits:

  • Correspondence: In this type of audit, you’ll work with your auditor entirely through mail. You’ll need to send supporting documentation to the auditor; they’ll review it and then provide a response.
  • Desk: For desk audits, you’d set up a time to speak with your auditor over the phone. You’ll still need to send in supporting documents, but your auditor will discuss the details during the phone meeting rather than sending another letter.
  • Field: Field audits involve agents coming directly to your place of business. These, however, aren’t common for IRS audits.

Gather Documentation

Your auditor will likely require documentation to perform the audit. This may include:

  • Payroll records
  • Bank statements
  • Employment tax records
  • Receipts
  • Any documents showing full or partial closures

Gather any documents you think would be useful for your claim and provide them to your auditor.

Comply With the IRS

No matter the outcome, it’s important to comply with the IRS throughout the process. Compliance can make the process less stressful and reduce the risk of complications.

File an Appeal

If you believe the IRS issued an audit incorrectly, you can file an appeal and request an ERTC audit defense from a qualified lawyer. This can sometimes be a lengthy process, but it may be worth it, depending on the circumstances.

Don’t Face an IRS Audit Alone – Request Help From Dayes Law Firm

Facing an IRS audit can seem intimidating. However, you have options for your ERTC audit defense. 

At Dayes Law Firm, we’ll provide more information, help you gather documents, and assess your claim’s eligibility. Call 866-875-1005 to request a free consultation and learn more about handling an audit the right way.