The IRS recently announced that they have trained at least 300 staff to do Employee Retention Credit (ERC) audits. They also indicated that they will be reviewing companies that are promoting the credit to determine if a criminal investigation is warranted.
We have posted before that many companies are pushing these credits when farmers and other taxpayers likely do not qualify. We now know that the IRS will be aggressively auditing ERC claims.
We have already seen some audits in this year. The information that is requested by the IRS includes the following:
- Form 941-x or 943-x workpapers,
- Documentation substantiating eligibility
- Gross receipts test, or
- Partial suspension (this is typically where there are aggressive positions),
- Average number of 2019 full-time employees,
- Actual calculation of the ERC,
- Any aggregated group review, and
- PPP loan (to make sure wages are not double counted).
We will keep you posted on any updates regarding ERC audits.
