Back to top

Blog

Click here to go back
Oct 24 2022
Employee Retention Credit

Posted in general

Things you need to know if you have claimed, or plan to claim the Employee Retention Credit

·        You are required to amend your 2020 and 2021 Business and Individual Income Tax Returns.

·        You will owe 15 to 45 percent tax on the credit depending on your individual tax bracket.

·        The cost to amend the 2020 and 2021 Business and Individual Income Tax Returns will be at least $2,000 or more depending on the amount of owners in the Partnership or Corporation.

·        When you are audited and it is determined that you did not qualify for the credit you will have to return the money with interest and penalties.

·        You will not be refunded the cost paid to the company that calculated your credit or the cost paid to your accountant that prepared your amended returns.

If you qualified due to Supply Chain Disruption, the following proof is required:

If you are unable to attain documentation on all of the following, you are not qualified for ERC

1.      Suppliers name and location that was unable to make deliveries due to a Government order

2.      The specific Government order and the specific U.S. State or Local Government imposing the order. (Foreign jurisdictions don’t apply).

3.      The period in which this Government order applied (ERC can only be claimed during the order).

4.      Proof that critical goods could not be attained elsewhere

IRS audits have already begun on the Employee Retention Credit. The IRS just hired 77,000 new auditors and it is expected that most, if not all ERC claiming taxpayers will be audited.

https://www.withum.com/resources/irs-begins-auditing-the-employee-retention-credit/

Here is the IDR (Information Document Request) the IRS will present to you when you are audited and audit representation will be expensive whether you win or lose:

1.      On what grounds are you eligible for ERC? Explain in detail how qualification test were met

2.      List government orders that either fully or partially suspended your business

3.      Provide gross receipts computations, spreadsheets and backup financial records for 2019, 2020 and 2021 by year and by all relevant quarters

4.      Submit your ERC calculation

5.      Submit payroll journals

6.      Submit all 2020 and 2021 payroll tax returns and income tax returns

7.      Submit list of owners

8.      Submit list of employees

9.      Submit related party information

10.   Submit PPP loan forgiveness information

11.   Submit proof of allocation of wages between PPP and ERC

12.   All of the above Supply Chain Disruption documentation

Last Updated by Admin on 2022-10-24 10:39:37 PM

News

Avoiding Common Mistakes When Claiming Credits

Avoiding Common Mistakes When Claiming Credits  There are many credits available for families with dependents, but sometimes the qualifications for […] The post Avoiding Common Mistakes When ...

Use caution when paying or receiving payments from friends or family members using cash payment apps

Digital Payment Applications & Taxes Here’s something important to pay attention to if you use certain cash applications to send […] The post Use caution when paying or receiving payments...

Section 603 of the TAS Act Could Help Taxpayers Get Refunds Faster

On January 30, 2025, Senator Mike Crapo, chairman of the Senate Finance Committee, and Senator Ron Wyden, the Committee’s ranking […] The post Section 603 of the TAS Act Could Help Taxpayers ...

The Tax Ramifications of Tying the Knot

When you get married, your tax situation changes. Your marital status as of December 31 determines your tax filing options […] The post The Tax Ramifications of Tying the Knot appeared first ...

Use the Tax Withholding Estimator and Take Action on Your Tax Withholding Now

The Taxpayer Advocate Service encourages you to use the Tax Withholding Estimator now. Who should use it and why now? […] The post Use the Tax Withholding Estimator and Take Action on Your Ta...

Rain or Shine: The IRS Must Prepare Now for Next Year’s Filing Season

On June 25, I released my mid-year Fiscal Year 2026 Objectives Report to Congress. In it, I praise the IRS […] The post Rain or Shine: The IRS Must Prepare Now for Next Year’s Filing Season a...

National Taxpayer Advocate Issues Mid-Year Report to Congress; Highlights Successful 2025 Filing Season and Challenges for 2026

National Taxpayer Advocate Erin M. Collins today released her Fiscal Year 2026 Objectives Report to Congress, highlighting a largely successful […] The post National Taxpayer Advocate Issues ...

Criminal VDP: TAS Reports a Win For Taxpayers – IRS Agrees to Remove Willfulness Checkbox on VDP Application Form

It is that time of year again – school is out and so are report cards. It is also time […] The post Criminal VDP: TAS Reports a Win For Taxpayers – IRS Agrees to Remove Willfulnes...

The IRS incorrectly recorded me as deceased – what should I do?

If IRS records incorrectly indicate that you or your spouse are deceased, this tax tip has instructions that can help […] The post The IRS incorrectly recorded me as deceased – what sho...

TAS Encourages You to Provide Comments on Transitioning to Electronic Payments by June 30

Know your rights and what to do if the IRS sends you a bill after you already paid your taxes. […] The post TAS Encourages You to Provide Comments on Transitioning to Electronic Payments by J...