ERC Audit Help
The Employee Retention Credit (ERC) was a pandemic-era lifeline for businesses, but it’s now one of the IRS’s biggest audit targets. Why? Billions in credits were claimed, and the IRS believes some were ineligible or miscalculated. Even honest mistakes can trigger an audit.
Common audit sparks include overstating revenue drops, misinterpreting shutdown rules, reusing the same wages for both PPP forgiveness and ERC, or working with an overly aggressive “ERC mill.”
If you claimed the ERC, this isn’t about being scared; it’s about being prepared. An audit doesn’t mean you did anything wrong, but it does mean you need to be ready to prove every number you reported.
The IRS at Your Door
ERC audits almost always start with an official IRS letter. If you see Letter 6612 or another notice mentioning the ERC, it’s time to take action. The letter may also include an Information Document Request (IDR) with a deadline of 30 days for you to submit specific records.
Ignore the call from “IRS Steve” claiming he needs your information over the phone. Real audits arrive on official letterhead, by mail, with a return address you can verify. Once you’re sure it’s legitimate, the clock starts ticking.
Your Audit Survival Kit
The goal? Present the IRS with a complete, coherent story that aligns with your filed returns. Well-structured documentation not only supports your credit defense but also indicates to the auditor that you prioritize compliance.
Consider your ERC documentation as a fortress; the more robust your walls, the more challenging it is for the IRS to find vulnerabilities.
This involves gathering:
- Payroll records for the quarters you claimed the ERC.
- Tax returns showing how you accounted for the credit.
- Revenue comparisons that prove your eligibility.
- Government orders if you are qualified due to a shutdown.
- A clear explanation of how you avoided “double dipping” wages with PPP forgiveness.
The First 5 Steps When an ERC Audit Notice Arrives
Each of these steps is designed to keep things proactive rather than reactive. Taking your time and paying attention to each request helps prevent the IRS from needing to look further into your situation.
Just follow these steps carefully:
- Read the notice carefully and mark your deadlines.
- Verify it’s real.
- Gather your ERC-related documents.
- Talk to a tax professional, preferably a tax attorney who knows ERC audits inside and out.
- Prepare a clean, complete response to send before the deadline.
When the IRS Says “No”
Even with your best efforts, the IRS might partially or fully disallow your ERC. If that happens, you’ll receive a notice, often Notice 105-C, explaining what was denied and why. You may owe a portion of the credit back (plus interest and possibly penalties).
But here’s the good news: you still have options. You can appeal within the IRS, often leading to a better result, or you can take your case to court if necessary. And if part of your claim was wrong but unintentional, a skilled attorney may help reduce or remove penalties.
Why a Tax Attorney Is Your Best Ally
When the IRS challenges your Employee Retention Credit, a skilled tax attorney offers more than an understanding of tax law; they provide a strategic plan to protect your credit and business. They review your ERC claim beforehand, spotting weaknesses and preparing clear documentation.
This proactive approach prevents issues and reduces disputes.
An experienced attorney handles IRS communication, shielding you from pressure and ensuring precise wording, document preparation, and explanation presentation. If you disagree with an IRS decision, your attorney can appeal, negotiate, or represent you in U.S. Tax Court.
Most importantly, a tax attorney is there to assist you in avoiding statements or submissions that could inadvertently damage your case, and they will also endeavor to mitigate penalties if any errors are identified. Having a dedicated professional by your side makes sure you can approach the ERC audit process with confidence.
Ready To Get Legal Help?
An ERC audit can be managed effectively if you are organized, proactive, and seek appropriate assistance, such as from an experienced tax attorney like Todd Unger, who possesses extensive expertise in this field. The IRS is intensively scrutinizing these credits; however, a thoroughly prepared defense can ensure the preservation of your refund.
If you’ve received an ERC audit notice, we’re here to help you through it. Consider scheduling a consultation with Todd S. Unger, Esq. LLC, and together, you’ll develop a clear strategy.
