For many businesses, receiving an employee retention credit (ERC) refund was a lifesaver; likely, your business was no exception. Now the IRS is on the hunt for ERC fraud. If you’re being audited or worried you may be, here’s what to do.
Collect Your Documentation
Ideally, you’ve kept thorough business records throughout COVID-19. These documents should include payroll records, Form 941/941-X, W-2s, gross-receipt data, government orders (if applicable), and any worksheets or calculations used to calculate the ERC. It is essential to have all the required documents ready before you respond to the IRS.
Carefully Review Your IRS Notice
The IRS has sent you an audit letter. Understandably, you may have panicked and glossed over some of the fine print. Make sure you carefully review this letter, so you understand why you are being audited, which tax periods are being questioned, and perhaps most importantly, your deadline to respond. The letter can be confusing, so hiring a qualified tax consultant to help you is always a good idea.
Prepare Your Response
Ignoring the IRS ERC audit isn’t an option. If you believe the IRS has made a mistake, work with your tax professional to draft a clear and strong response, making your case and providing solid evidence.
If you believe you may have violated the terms of the ERC and will be responsible for repayment, you will need to make a financial repayment plan. At Highland Tax Group, our qualified tax professionals can help you respond to the IRS. Our skilled tax consultants can help you secure the best possible outcome with the IRS, whether by facilitating a feasible payment plan or by fighting a baseless ERC audit.