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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