IRS Recapturing ERC Claims: What You Need to Know

The IRS recently announced that it intends to recapture more than 30,000 Employee Retention Credit (ERC) claims. As part of their ongoing compliance measures, this move has caused confusion and concern among businesses that claimed this credit. This article will delve into why the IRS is taking this action, what it means for your business, and how you can protect your tax credits.

Understanding the Employee Retention Credit

The Employee Retention Credit (ERC) was introduced as part of the CARES Act to encourage businesses to keep employees on the payroll during the COVID-19 pandemic. Initially, the credit was worth up to $5,000 per employee for 2020. For 2021, the credit increased significantly, allowing businesses to claim up to $28,000 per employee over the four quarters.

The IRS's recent actions to recapture ERC claims have raised several critical questions:

• Why is the IRS recapturing ERC claims?
• Who will be affected?
• What can businesses do to protect themselves?

Why Is the IRS Recapturing ERC Claims?

The IRS has cited several reasons for recapturing these claims:

• Fraudulent Claims: Some businesses might have claimed the credit without meeting the eligibility criteria. This includes inflating payroll figures or not experiencing a significant decline in gross receipts.
• Clerical Errors: Mistakes during filing can result in inaccurate claims. The IRS is scrutinizing these errors more closely than before.
• Compliance Reviews: As part of their ongoing efforts to ensure compliance, the IRS may routinely review high-value claims to verify accuracy.

Who Will Be Affected?

The IRS will focus on businesses that:

• Filed ERC Claims: Between 2020 and 2021.
• Show Inconsistent Data: For example, businesses that claimed the ERC but also reported different figures elsewhere in their returns.
• Fail Random Audits: These businesses may have their claims reviewed and potentially recaptured if discrepancies are found.

What Can Businesses Do to Protect Themselves?

Here are some strategies to safeguard your ERC claims:

• Keep Detailed Records: Ensure all documentation related to ERC claims, such as payroll records and financial statements, is kept organized and accessible.
• Conduct Internal Audits: Regularly review your claims for accuracy and compliance with IRS guidelines.
• Consult Professionals: Work with tax professionals who are familiar with ERC requirements and IRS procedures to verify the correctness of your claims.

Our Expert Guidance

Navigating the complexities of ERC claims can be challenging. The recent IRS decision to recapture over 30,000 claims underscores the importance of accurate and compliant filing.

To ensure youre not at risk, consider reviewing your tax filings and ERC claims with our team of experts. **Book a call with us now!** Protect your future tax credits and keep your business compliant by scheduling a call with our experts. To learn more about us and how we can help you, visit our home page.