As a component of the CARES Act, the Employee Retention Credit (ERC) was established to provide businesses with a refundable tax credit, encouraging them to retain employees throughout the pandemic. This credit can be significant, and employers with a large workforce may receive tax refunds of hundreds of thousands of dollars if they claim it. Due to the considerable amount of money involved, the IRS has already notified employers that they will be conducting audits to ensure compliance with the ERC guidelines.

Facing an IRS audit can be a daunting experience. And an ERC audit, which could involve sums in the thousands or even millions, could be even more intimidating. But ensuring all of your documentation is in order will allow you to navigate an ERC audit successfully.

What documents do I need to have for an ERC Audit?

An ERC audit will most likely be more comprehensive than a traditional audit. The agency may request much documentation, including:

  • Official government orders that halted your business operations.
  • Documentation you used to determine if the government’s orders resulted in the suspension of a significant portion of your operations.
  • Proof of your significant decline in gross receipts.
  • Work and payroll records that show employee wages were paid.
  • Documentation supporting the amount of allocable qualified health plan expenses.
  • Copies of applicable federal employment tax returns, including Forms 941, 941-X, and W-2.

What more should I know?

Similar to standard audits, the IRS will notify you by mail that you have been selected for an audit. The letter will likely specify the year(s) and quarter(s) under examination, as well as details on the expected response timeline. Beware of scam artists. The IRS will never contact you by phone seeking repayment or requesting personal information relevant to an audit.

Did your business claim the ERC?  Are you concerned you might be audited? Given the additional scrutiny, the IRS will apply to an ERC audit, engaging a professional with comprehensive knowledge of everything concerning the ERC is crucial.

At Miami CFO, we are well-versed in the nuances of the ERC. Our tax professionals have extensive knowledge and experience, having calculated and processed millions of dollars of ERC claims. Use this link to schedule a meeting with us today: