300 New IRS Auditors for ERC
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 like 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.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
[…] Remember that qualifying for the ERC is not always black and white, it’s normally situational and requires some interpretation of IRS guidance. Also, if an ERC is claimed through an amended payroll tax return, the statute of limitations on that claim is extended from three years to five years. So, taxpayers are giving the IRS an additional two years to potentially examine the credit, increasing a taxpayer’s potential exposure. The IRS also recently hired 300 new auditors for these ERC claims. […]