Are You At Risk for an ERC Fraud Audit or Investigation in New York?

Did your business claim the Employee Retention Credit (ERC) during or after the COVID-19 pandemic? Are you yet to face any IRS ERC-related scrutiny from the Internal Revenue Service (IRS)? If your answer to both of these questions is “Yes,” now is the time to make sure that you aren’t at risk. The IRS is actively pursuing thousands of audits and investigations focused on IRS ERC fraud, and the businesses and business owners targeted in these inquiries are facing substantial penalties in many cases.

If your business improperly claimed the IRS ERC, you have options available—and you will want to take appropriate action before the IRS initiates an inquiry. Once the IRS initiates an inquiry, your options will become much more limited, and you will need to answer difficult questions about why you didn’t resolve your business’s fraudulent ERC filing on your own.

Evaluating IRS ERC Claims for Federal Compliance

Evaluating your business’s ERC claim (or claims) for federal compliance starts with gathering all relevant documentation. This includes not collecting only copies of your business’s tax returns, but also gathering the documentation that you (or your business’s accountant) used when calculating your business’s credits under the ERC.

With this documentation in hand, the next step is to reevaluate your business’s eligibility for the ERC for each quarter that it claimed the credit. The eligibility criteria changed multiple times in 2020 and 2021—so this can be more challenging than it initially seems. If you are unclear on whether your business improperly claimed the ERC, you will want to get help from a New York tax attorney promptly.

Options for Resolving Invalid IRS ERC Claims

If you need to resolve an invalid ERC claim, choosing the best course of action requires a clear understanding of the various options that are available. While there are multiple potential options, not all of these options are available in all circumstances. For example, depending on why your business improperly claimed the ERC (among other pertinent factors) your options may include:

• Filing an amended return
• Withdrawing your business’s ERC claim (or claims)
• Submitting an application under the IRS’s ERC Voluntary Disclosure Program (through November 22, 2024)
• Submitting an application under IRS CI’s Voluntary Disclosure Practice

While your best course of action may not be immediately clear, what is clear is that you should not simply do nothing. If you ignore your business’s invalid ERC claim and the IRS initiates an audit or investigation, the time and costs involved in responding to the IRS’s inquiry will be far greater than the time and costs that would have been involved in taking a proactive approach.

Get Help from the New York Tax Attorneys at Thorn Law Group

If you have questions or concerns about your business’s ERC claim (or claims), we invite you to get in touch. To discuss your options with an experienced New York tax attorney at Thorn Law Group, give us a call at (914) 534-6004 or tell us how we can contact you online today.