Last Updated on: 20th October 2023, 07:13 pm

How Lawyers Can Help With Employee Retention Tax Credit Fraud Audits

The employee retention tax credit (ERTC) was created by the CARES Act in 2020 to help businesses retain employees during the COVID-19 pandemic. The credit provides a refundable tax credit of up to $5,000 per employee for eligible businesses. However, with any government program there is potential for abuse and fraud. The IRS has been auditing businesses that claimed the ERTC to look for improper payments. If your business is being audited for potential ERTC fraud, here’s how a lawyer can help.

Understand the ERTC Eligibility Requirements

There’s a bunch of complicated legal mumbo-jumbo around ERTC eligibility. A good tax attorney will understand all the ins-and-outs of what qualifies a business for the tax credit. They’ll look at factors like:

• Did your business experience a significant decline in gross receipts during the quarter the credit was claimed?
• Did you have 100 or fewer full-time employees?
• Were operations fully or partially suspended due to a COVID-19 government order?

Knowing the nitty-gritty details can help the lawyer build a strong case for your eligibility if errors were made.

Communicate With the IRS

Dealing with the IRS can be intimidating. A lawyer serves as an intermediary to handle all communications. They submit information requests, file extensions, and negotiate on your behalf. This takes the stress off the business owner. Attorneys are also familiar with IRS protocol, rules and timelines. They can navigate the audit process smoothly.

Identify Unauthorized Claims

Sometimes tax credit claims are filed without the business owner’s knowledge, like by a dishonest accountant. A lawyer can detect unauthorized filings and report them to the IRS. This shows the business wasn’t complicit in any wrongdoing.

Challenge Audit Findings

If an audit concludes the tax credits were improperly claimed, a lawyer can challenge the IRS findings through a formal appeal. They may identify mitigating circumstances or technical errors in the audit itself. Appeals must meet strict deadlines and follow specific procedures which attorneys are versed in.

Negotiate Penalties and Interest

If the IRS determines penalties and interest are owed, an attorney can often negotiate a reduction. Based on factors like the audit results and the business’ financial hardship, some relief may be granted. Lawyers have the experience to work out settlements.

Explore Resolution Options

If the audit stands, a lawyer will explain all options like payment plans, offers in compromise, penalty abatement, etc. They will help develop a resolution strategy that makes the most financial sense.

Dealing with an ERTC fraud audit can be scary and confusing. Get an experienced tax attorney on your side. Their expertise can save time, money and frustration throughout the process. Don’t go it alone against the IRS!

References

IRS website on the Employee Retention Credit

Journal of Accountancy article on ERTC eligibility

Law360 article on ERTC audits