Dealing with an ERC IRS audit can be a complicated and stressful situation. An IRS audit concerning the Employee Retention Credit (ERC) program can be even more stressful due to the complexity of the ERC rules. As with any audit, the IRS will require that you provide it with detailed records. Our team of tax professionals at Highland Tax Group has experience dealing with the IRS and ERC audits and can help you get through the process.
What Documents Will the IRS Ask for in an ERC Audit?
To substantiate an ERC credit, a business must have accurate and complete records. The primary documents that the IRS will ask for are Form 941 for any tax period for which the ERC credit was claimed, along with Form 941-X if a business has filed an amended return to claim the ERC credit retroactively.
If the credit was claimed based on a decline in revenue, the IRS will require detailed worksheets showing the calculation. The records must show the comparison of gross receipts against the relevant quarter in 2019, or before the onset of the pandemic. These worksheets must be supported by underlying financial documentation, such as profit and loss statements.
For claims based on a suspension of operations, the specific governmental order that caused the suspension must be cited. In addition, the business must explain in writing how the governmental order caused the suspension of operations.
Detailed payroll records will also be required to be produced, which must support the amount of qualified wages claimed. The records should show the gross wages paid to each employee, along with documentation of any qualified health plan expenses.
Highland Tax Group Can Help You Survive an IRS Audit
Highland Tax Group has assisted many of its clients in dealing with an ERC credit audit, including preparing to provide the IRS with all relevant documentation. Remember, the IRS is not looking for ways to help you keep more of your money. They are looking for any mistake you made that will net the government more of your money. Contact a member of our qualified tax team today to see how we can help you.