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ERC Desk Audits: Tips for Virtual Meetings

ERC Desk Audits: Tips for Virtual Meetings

So, you’ve claimed the Employee Retention Credit (ERC) – but now the IRS wants to take a closer look, right? Don’t panic, an ERC desk audit is simply the agency’s way of verifying your eligibility for the tax credit. But, make no mistake, these audits can be complex – which is why preparation is key. In this guide, we’ll walk through everything you need to know about virtual ERC desk audit meetings with the IRS. From understanding the process to organizing your documents, we’ve got you covered – so take a deep breath, you’ve got this.

What is an ERC Desk Audit?

Let’s start with the basics. An ERC desk audit is an examination conducted by the IRS to verify that a business properly claimed the Employee Retention Credit. Rather than an in-person field audit, these are “correspondence audits” – meaning they’re handled virtually through mail, fax, or online portals. During the audit, the IRS will request specific documentation and information to substantiate your ERC claim. This could include:

  • Payroll records
  • Documentation of partial/full suspensions or significant decline in gross receipts
  • Employee headcounts and wages paid
  • Health plan expenses
  • And more

The auditor will review these materials to ensure you met the eligibility requirements and calculated the credit amount correctly.

Understanding the Virtual Audit Process

So, what can you expect during a virtual ERC desk audit? While the process can vary, here’s a general overview:

  1. Initial Contact: You’ll receive an initial letter or notice from the IRS informing you that your ERC claim has been selected for an audit. This will outline the information they need and provide a response deadline (typically 30 days).
  2. Information Request: The IRS will send you an Information Document Request (IDR) listing the specific records and documentation they require for the audit. This is your chance to gather everything thoroughly.
  3. Virtual Meetings: You may be asked to participate in one or more virtual meetings with the auditor via video conference. These allow them to ask follow-up questions and discuss any issues or discrepancies.
  4. Additional Requests: Depending on your initial responses, the auditor may request additional documentation or clarification during the process.
  5. Audit Conclusion: Once the IRS has reviewed all materials, they’ll issue a final report outlining their findings and any adjustments to your ERC claim amount.

It’s crucial to respond promptly and thoroughly to each request during this process. Missing deadlines or providing incomplete information could jeopardize your ERC claim – so stay organized from the start.

Preparing for Your Virtual ERC Audit Meeting

With the basics covered, let’s dive into how to prepare for those all-important virtual meetings with the IRS auditor. Proper preparation is half the battle, so follow these tips:

1. Gather All Requested Documentation

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First thing’s first – collect every single document and record the IRS has requested, no exceptions3. Go through the IDR line-by-line and check off each item as you compile it.Providing incomplete or disorganized materials is a surefire way to extend the audit process. So, take the time to gather everything thoroughly from the start.

2. Organize Your Materials

Once you have all the requested documentation, organize it meticulously. Create digital folders sorted by category (payroll, receipts, headcounts, etc.) with clear file names.You may also want to prepare a summary document that outlines key information and calculations – this can serve as a roadmap for the auditor.

3. Review and Understand the Materials

Don’t just gather the documents, make sure you thoroughly understand them too. Review all the materials and calculations so you can speak to them knowledgeably during the virtual meeting.Identify any potential issues or discrepancies ahead of time. That way, you can have explanations ready rather than being caught off-guard.

4. Designate a Point Person

Virtual meetings work best with one clear point of contact. Designate someone from your team (likely the controller or another financial expert) to lead the audit process and represent your company.This person should be extremely familiar with your ERC claim and the documentation provided. They’ll handle all communication and be prepared to answer questions during meetings.

5. Test Your Virtual Meeting Setup

Don’t overlook the technical aspects! Well before your meeting, test your virtual conferencing setup to ensure everything runs smoothly.Check your webcam, microphone, internet connection, and any screen-sharing capabilities. You may also want to prepare a professional virtual background or backdrop. The last thing you want is avoidable technical difficulties derailing the meeting. A smooth virtual experience reflects positively on your organization.

6. Prepare Key Talking Points

While you don’t want to script the entire meeting, it’s wise to prepare some key talking points ahead of time. Identify the crucial information and calculations you’ll need to convey. You can outline these points on a notecard or document to reference during the virtual audit meeting. This ensures you hit all the important details without rambling or getting sidetracked.

7. Anticipate Questions and Challenges

Based on your review of the materials, try to anticipate any potential questions or challenges the auditor may raise. What areas seem complex or open to interpretation? Brainstorm explanations and be ready to provide additional context or documentation if needed. The goal is to avoid any surprises during the meeting.

8. Practice, Practice, Practice

Finally, do a dry run! Have your designated point person practice presenting the materials and responding to practice questions.You can role-play with colleagues or just have them observe and provide feedback. This helps identify any holes or areas that need further explanation before the real thing.

Tips for a Successful Virtual ERC Audit Meeting

With your preparation complete, it’s time for the main event – the virtual audit meeting itself. Here are some tips to help it go smoothly:

1. Test Your Tech One More Time

Do one final tech check 15-30 minutes before your scheduled meeting time. Test your webcam, microphone, internet, and video conferencing software.Having your technology ready to go eliminates any flustered first moments and ensures a professional start.

2. Find a Quiet, Distraction-Free Space

Choose a quiet, private space with minimal background noise or distractions for your virtual meeting. This allows you to focus entirely on the discussion.Close any unnecessary apps or programs and silence notifications on your devices. You want to avoid any unprofessional interruptions.

3. Present Yourself Professionally

While you’re meeting virtually, you still need to present yourself as a professional. Dress for a business meeting and maintain a neutral background or backdrop.Avoid eating, chewing gum, or other distracting habits during the call. You want the auditor’s focus to be solely on the materials and discussion.

4. Be Concise and Responsive

During the meeting itself, strive to be clear, concise, and responsive in all your communication. Don’t ramble or go off on tangents. Listen carefully to each question and provide a direct, focused answer. If you’re unsure, it’s okay to say you’ll need to follow up rather than guessing.

5. Leverage Visual Aids

One advantage of virtual meetings is the ability to share your screen and visuals. Use this to walk the auditor through key documents, calculations, and summaries.Highlighting information visually helps reinforce your points and ensures you’re on the same page. Just be sure to share your screen smoothly without technical hiccups.

6. Maintain an Open DialogueWhile you want to lead the discussion, also be open to the auditor’s questions and input. Don’t get defensive if they raise concerns or challenge certain points. Maintain a collaborative, solutions-oriented dialogue. Your goal is to address any issues directly and provide satisfactory explanations or documentation.

7. Take Thorough Notes

Have a designated notetaker during the virtual meeting to capture any key discussion points, follow-up items, or additional documentation requests.Reviewing these notes afterwards ensures you have a clear understanding of any next steps before providing responses.

8. Summarize and Confirm Next Steps

Before ending the meeting, summarize the main discussion points and confirm any action items or next steps with the auditor.This alignment ensures you’re both on the same page moving forward and avoids any miscommunications or missed deadlines.

Wrapping Up the ERC Desk Audit

Even once your virtual meetings wrap up, there may still be some loose ends to tie up for your ERC desk audit:

Follow-Up Responses and Documentation

Provide any follow-up information, documentation, or explanations requested by the auditor promptly and thoroughly. Missing these can unnecessarily extend the audit timeline.

Final Report and Findings

Eventually, the IRS will issue their final report and findings for your ERC desk audit. Review this carefully to understand:

  • If your full ERC claim was accepted/denied
  • Any adjustments or changes to the credit amount
  • Explanations for their determinations
  • Next steps if you disagree with the findings

Appeals Process (If Applicable)

If you disagree with the IRS’ final determination, you do have options to appeal or dispute the findings. However, this process has strict deadlines, so you’ll need to act quickly. Consult with your tax professional or legal counsel to understand your appeal rights and options based on your specific situation.

Documentation Retention

Regardless of the outcome, be sure to retain all documentation, correspondence, and records related to your ERC claim and audit. The IRS can revisit these credits for up to 3 years after filing, so you may need to produce materials again. Maintain thorough records to simplify any future audits.

When to Seek Professional Help

Let’s be honest, ERC desk audits are complex – there’s no shame in seeking expert help to guide you through the process. In fact, it’s often advisable, especially for larger ERC claims. Tax professionals and legal counsel experienced in ERC audits can provide invaluable assistance with:

  • Compiling thorough, accurate documentation
  • Calculating your credit amount and eligibility
  • Preparing talking points and strategy
  • Representing you in virtual audit meetings
  • Handling any disputes or appeals if needed
  • And more

While their expertise comes at a cost, it could ultimately save you from improperly handling the audit and losing out on the full ERC amount you’re owed. So if you’re feeling overwhelmed or want to ensure you don’t miss a beat, looping in a qualified professional is a wise move. Call us at Spodek Law Group today at 212-210-1851 or schedule a free consultation online. 

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