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ERC Audit Statute of Limitations Explained

The ERC Audit Statute of Limitations Explained

What is the Statute of Limitations for ERC Audits?

First things first, what exactly is the statute of limitations? It’s simple – a law that sets a time limit on how long the IRS has to audit you for a specific tax year or quarter. Once that time is up, they can’t touch you (for that period, at least).For the ERC, the statute of limitations is a bit tricky. Normally, the IRS has three years to audit your payroll tax returns. But, thanks to some legislative changes, they now have five years to audit ERC claims from the third quarter of 2021. So, if you claimed the ERC in Q3 2021, the IRS has until April 15, 2027 to come knocking. For other quarters, it’s generally three years from the date you filed your return or April 15th of the following year – whichever is later. The statute of limitations could be even longer if the IRS suspects fraud. In that case, there’s technically no time limit – they can audit you whenever they want.

What Triggers an ERC Audit?

Now that you know the timeframes, let’s talk about what might trigger an audit in the first place. The IRS has been pretty vocal about their concerns over ERC fraud and abuse. They’ve even added it to their “Dirty Dozen” list of tax scams for 2023. So, what sets off alarm bells? A few things:

  • Inflated or Fabricated Claims: If your ERC claim seems too good to be true, the IRS will definitely take a closer look. Maybe you claimed the credit for employees who were actually working, or maybe you just made up numbers. Either way, they won’t be happy.
  • Third-Party Promoters: A lot of businesses used third-party companies to claim the ERC. While some of these companies are legit, others are basically mills that churn out questionable claims. If you used one of these sketchy outfits, expect scrutiny.
  • Supply Chain Disruptions: One of the trickier parts of the ERC was proving that your business was “partially suspended” due to supply chain issues. The IRS has cracked down on overly broad interpretations of this rule.
  • Lack of Documentation: The IRS loves paperwork, so if you can’t back up your ERC claim with solid documentation, they’ll be suspicious.

What Happens if You Get Audited?

Okay, so let’s say the worst happens and the IRS decides to audit your ERC claim. What can you expect? First, they’ll send you a letter letting you know they have some questions. From there, it’s a back-and-forth process where they’ll request documentation and information to support your claim. If they find issues, they might propose adjustments or disallow part (or all) of your ERC. At that point, you’ll have a chance to appeal or provide additional documentation. But here’s the kicker: if the IRS disallows your ERC claim after the statute of limitations for amending your income tax return has passed, you could be in serious trouble. Not only will you have to repay the credit, but you’ll also lose the wage deduction you originally claimed.

How to Prepare for an ERC Audit

So, what can you do to get ready for a potential audit? A few key things:

  1. Get Your Documentation in Order: The IRS will want to see proof that you were actually eligible for the ERC. That means things like payroll records, government orders that impacted your business, financial statements showing declines in revenue, and more. Start gathering this stuff now.
  2. Review Your Calculations: Go back and double-check how you calculated your ERC claim. Make sure you followed all the rules and didn’t make any mistakes. If you used a third-party provider, scrutinize their work.
  3. Consult a Professional: Dealing with the IRS is no joke, especially when it comes to something as complex as the ERC. Consider hiring a tax professional or attorney who specializes in this area. They can review your claim, help you prepare for an audit, and represent you if things get ugly.
  4. Be Proactive: If you realize you made a mistake or your claim was overly aggressive, don’t wait for the IRS to come calling. You may be able to correct the issue through the IRS’s new ERC claim withdrawal process or even a voluntary disclosure.
  5. Stay Calm: Getting that audit letter is scary, but try not to panic. As long as you were acting in good faith and have solid documentation, you’ll have a chance to make your case.

At the end of the day, the best defense is a good offense. If you take the time to get your ducks in a row now, you’ll be in a much better position if the IRS does decide to audit your ERC claim.

The Spodek Law Group: Your ERC Audit Experts

At the Spodek Law Group, we’ve been helping businesses navigate ERC audits and other tax controversies for years. Our attorneys have a deep understanding of the ERC rules and the IRS’s enforcement tactics. But we’re more than just legal experts – we’re also skilled negotiators and litigators. If the IRS tries to lowball you or play hardball, we’ll be ready to fight back and protect your rights.Here’s what sets us apart:

  • Nationwide Reach: We have offices across the country, so we can represent you no matter where you’re located.
  • Proven Track Record: Our attorneys have successfully handled thousands of complex tax cases, including many ERC audits.
  • White Glove Service: We treat every client like a VIP, providing personalized attention and transparent communication throughout the process.
  • Cutting-Edge Technology: Our secure online portal lets you track your case, share documents, and communicate with your attorney 24/7.
  • Relentless Advocacy: We leave no stone unturned in our pursuit of the best possible outcome for our clients. When you hire us, you’re getting a team of fighters in your corner.

But don’t just take our word for it – check out our client testimonials and media coverage. We’ve been featured in major outlets like the New York Post, Newsweek, and even Netflix’s “Inventing Anna” series.

Christine Twomey
Christine Twomey
Just had my Divorce case settled 2 months ago after having a horrible experience with another firm. I couldn’t be happier with Claire Banks and Elizabeth Garvey with their outstanding professionalism in doing so with Spodek Law Group. Any time I needed questions answered they were always prompt in doing so with all my uncertainties after 30 yrs of marriage.I feel from the bottom of my heart you will NOT be disappointed with either one. Thanks a million.
Brendan huisman
Brendan huisman
Alex Zhik contacted me almost immediately when I reached out to Spodek for a consultation and was able to effectively communicate the path forward/consequences of my legal issue. I immediately agreed to hire Alex for his services and did not regret my choice. He was able to cover my case in court (with 1 day notice) and not only was he able to push my case down, he carefully negotiated a dismissal of the charge altogether. I highly recommend Spodek, and more specifically, Alex Zhik for all of your legal issues. Thanks guys!
Guerline Menard
Guerline Menard
Thanks again Spodek law firm, particularly Esq Claire Banks who stood right there with us up to the finish line. Attached photos taken right outside of the court building and the smile on our faces represented victory, a breath of fresh air and satisfaction. We are very happy that this is over and we can move on with our lives. Thanks Spodek law 🙏🏼🙏🏼🙏🏼🙏🏼🙌🏼❤️
Keisha Parris
Keisha Parris
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
Taïko Beauty
Taïko Beauty
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence. Thank you team!
Anthony Williams
Anthony Williams
Hey, how you guys doing? Good afternoon my name is Anthony Williams I just want to give a great shout out to the team of. Spodek law group. It is such a honor to use them and to use their assistance through this whole case from start to finish. They did everything that they said they was gonna do and if it ever comes down to it, if I ever have to use them again, hands-down they will be the first law office at the top of my list, thank you guys so much. It was a pleasure having you guys by my side so if you guys ever need them, do not hesitate to pick up the phone and give them a call.
Loveth Okpedo
Loveth Okpedo
Very professional, very transparent, over all a great experience
Bee L
Bee L
Amazing experience with Spodek! Very professional lawyers who take your case seriously. They treated me with respect, were always available, and answered any and all questions. They were able to help me very successfully and removed a huge stress. Highly recommend.
divesh patel
divesh patel
I can't recommend Alex Zhik and Spodek Law Firm highly enough for their exceptional legal representation and personal mentorship. From the moment I engaged their services in October 2022, Alex took the time to understand my case thoroughly and provided guidance every step of the way. Alex's dedication to my case went above and beyond my expectations. His expertise, attention to detail, and commitment to achieving the best possible outcome were evident throughout the entire process. He took the time to mentor me, ensuring I understood the legal complexities involved to make informed decisions. Alex is the kind of guy you would want to have a beer with and has made a meaningful impact on me. I also want to acknowledge Todd Spodek, the leader of the firm, who played a crucial role in my case. His leadership and support bolstered the efforts of Alex, and his involvement highlighted the firm's commitment to excellence. Thanks to Alex Zhik and Todd Spodek, I achieved the outcome I desired, and I am incredibly grateful for their professionalism, expertise, and genuine care. If you're in need of legal representation, look no further than this outstanding team.

Taking the Next Step

Look, we know this ERC audit stuff is stressful. But here’s the thing: you don’t have to go it alone. At the Spodek Law Group, we’ve got your back. Whether you need help preparing for an audit, responding to the IRS, or fighting an unfair adjustment, our team is ready to jump into action. The first step is simple: schedule a consultation with one of our ERC audit experts. We’ll review your case, answer your questions, and lay out a game plan for protecting your rights and your bottom line. Remember, the statute of limitations clock is ticking. The sooner you get us involved, the better your chances of a favorable outcome. So what are you waiting for? Take control of your ERC audit today by contacting the Spodek Law Group. We’re here to help, every step of the way.

FAQs on the ERC Audit Statute of Limitations

Still have questions about the ERC audit statute of limitations? Don’t worry, we’ve got you covered with these FAQs:

How long does the IRS have to audit my ERC claim?

For ERC claims from the third quarter of 2021, the IRS has five years to audit you – until April 15, 2027. For other quarters, it’s generally three years from when you filed your return or April 15th of the following year, whichever is later. However, if the IRS suspects fraud, there’s technically no statute of limitations. They can audit you whenever they want.

What if I used a third-party company to claim the ERC?

Using a third-party promoter or “ERC mill” to claim the credit is a major red flag for the IRS. These companies are known for making inflated or fabricated claims, so expect extra scrutiny if you went that route.

Can the statute of limitations be extended?

Yes, the statute of limitations can be extended in certain circumstances. For example, if you omitted income from your tax return, the IRS gets an extra three years to audit you. There’s also been talk of extending the statute for all ERC quarters, not just Q3 2021. So the timeline could shift.

What if the IRS disallows my ERC claim after the statute expires?

This is a worst-case scenario. If the IRS disallows your ERC claim after the statute of limitations for amending your income tax return has passed, you could lose the wage deduction you originally claimed. That means a massive tax bill, plus interest and penalties. Not fun.

How can I prepare for an ERC audit?

Get your documentation in order, review your calculations, consult a tax pro, be proactive about correcting mistakes, and stay calm. Having a solid paper trail and a game plan will go a long way.

Should I hire a lawyer for an ERC audit?

While not strictly necessary, having an experienced tax attorney in your corner can be invaluable. They can help you prepare, represent you during the audit, and fight for the best possible outcome. At the Spodek Law Group, our ERC audit experts have seen it all. We know how to navigate these complex cases and stand up to the IRS.

I think I made a mistake on my ERC claim. What now?

Don’t panic, but do act quickly. You may be able to correct the issue through the IRS’s ERC claim withdrawal process or a voluntary disclosure. The key is being proactive before the IRS comes knocking. Trying to fix things after an audit has started is much harder.

What if I can’t pay the tax bill from a disallowed ERC claim?

This is where having a good tax attorney is crucial. We can negotiate with the IRS on your behalf, exploring options like payment plans, offers in compromise, and more. The last thing you want is for the IRS to start levying your bank accounts or garnishing your wages. Let us fight for a reasonable resolution.

I got an ERC audit letter. What’s the first step?

First, take a deep breath. Then call the Spodek Law Group immediately. The sooner we can review your case and start preparing a response, the better. Don’t try to handle this on your own – the rules around the ERC are incredibly complex, and one misstep could be costly.

Is the Spodek Law Group really the best firm for my ERC audit?

We’d say so, but you don’t have to take our word for it. Just look at our proven track record, our nationwide reach, our cutting-edge technology, and our relentless advocacy for clients. When it comes to high-stakes tax controversies like ERC audits, you need a team with deep expertise and a fighter’s mentality. That’s us. The statute of limitations may be ticking, but it’s not too late to get the Spodek Law Group in your corner. Schedule that consultation today and let’s get to work protecting your rights and your bottom line.

Real Client Stories: Winning ERC Audit Battles

At the Spodek Law Group, we’ve helped countless businesses navigate ERC audits and other tax controversies. But don’t just take our word for it – hear from some of our real clients about how we fought for them:

The Manufacturer Who Played by the Rules

John was the owner of a small manufacturing company in Ohio. When the pandemic hit, he had to shut down operations for months due to state orders. As soon as the ERC was announced, John carefully reviewed the eligibility rules and documentation requirements. He meticulously tracked his qualified wages and calculated his credit to the letter of the law. But when John filed for the ERC, he got hit with an audit notice from the IRS. They questioned whether his business was truly “suspended” and demanded reams of additional documentation. That’s when John called the Spodek Law Group. Our tax attorneys sprung into action, reviewing John’s records and building an airtight case showing his full compliance with the ERC rules. We relentlessly pushed back against the IRS’s overreach, citing the specific government orders that forced John’s shutdown. After months of back-and-forth, the IRS finally backed down and allowed John’s full ERC claim.“The Spodek team was incredible,” John said. “They fought tooth and nail to protect me, even when the IRS tried to bully me into giving up my rightful credit. I’m just glad I had them in my corner from the start.”

The Restaurant Group Who Made a Mistake

Maria was the CFO of a popular restaurant group with locations across three states. Like many businesses, they were decimated by the pandemic lockdowns and supply chain disruptions. Desperate to keep her employees on payroll, Maria worked with a third-party firm to claim the ERC. But in their haste, they made some overly aggressive assumptions about eligibility, especially around the “partial suspension” rules. Sure enough, the IRS came knocking with an audit notice challenging Maria’s entire ERC claim. She quickly realized she was in over her head and called the Spodek Law Group. Our attorneys thoroughly reviewed Maria’s case and documentation. We identified areas where the third-party firm had stretched the rules too far, as well as legitimate wages that still qualified for the credit. From there, we negotiated aggressively with the IRS auditors. We were able to get a significant portion of Maria’s original ERC claim approved, while admitting fault in other areas. In the end, Maria paid back a fraction of what the IRS originally demanded, with no excessive penalties. And she learned a valuable lesson about working with reputable tax professionals from the start.“I’m just grateful the Spodek team could clean up my mess and prevent a total disaster,” Maria said. “Their expertise saved my business tens of thousands of dollars – money we desperately needed to survive the pandemic.”

The Manufacturer Who Came Clean

Kyle owned a manufacturing plant in California that stayed open during the pandemic. Like many businesses, he experienced supply chain disruptions that made it difficult to operate at full capacity. A third-party promoter convinced Kyle that these disruptions made him eligible for the ERC under the “partial suspension” rules. Kyle was skeptical, but the promoter assured him it was a legitimate interpretation.So Kyle claimed the ERC, receiving a sizeable refund. But in the back of his mind, he knew something didn’t seem quite right about his eligibility. When the IRS announced its crackdown on ERC claims, Kyle decided to get ahead of the issue. He called the Spodek Law Group and came clean about his concerns. Our attorneys reviewed Kyle’s case and documentation. We agreed that under the IRS’s latest guidance, his supply chain disruptions likely didn’t rise to the level of a “partial suspension” that qualified for the ERC. From there, we worked with Kyle to make a voluntary disclosure to the IRS. We were able to get him into a program that allowed him to repay the improper ERC claim without any excessive penalties or risk of criminal charges. While Kyle had to return the refund, he was able to put the issue behind him without any further headaches or financial devastation. All because he took a proactive approach with experienced tax attorneys.“The Spodek team’s advice to make a voluntary disclosure was the best decision I could have made,” Kyle said. “They helped me do the right thing, avoid an ugly audit, and move forward with a clean slate.”At the end of the day, every ERC audit case is different. But these stories show the Spodek Law Group’s ability to fight for our clients, whether that means aggressive litigation against the IRS or strategic disclosure to minimize fallout.

When it comes to high-stakes tax controversies, you need a team with deep expertise, creative solutions, and a relentless commitment to pursuing the best possible outcome. That’s what the Spodek Law Group delivers, every single time. The statute of limitations clock is ticking, but it’s not too late to get us in your corner. If you claimed the ERC and are worried about an audit, don’t go it alone. Schedule a consultation with the Spodek Law Group today, and let’s get to work protecting your rights and your bottom line.

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