Jun 4, 2025

ERC Audit

IRS ERC Audits: What You Need to Know

The Employee Retention Credit (ERC) was a lifeline for many businesses during the COVID-19 pandemic. However, with increased claims, the IRS has ramped up its scrutiny of ERC applications. Here’s what you need to know about IRS ERC audits.

Why Is the IRS Auditing ERC Claims?

The IRS has noticed a surge in questionable ERC claims, often due to aggressive marketing by third-party promoters. As a result, the agency is conducting more audits to ensure only eligible businesses receive the credit.

Is the IRS going to audit ERC?

Yes, the IRS is actively auditing ERC claims. The agency has increased enforcement efforts and is reviewing both new and previously processed claims for compliance. Businesses that claimed the ERC should be prepared for possible audits and requests for documentation.

Is the IRS reviewing ERC refunds?

The IRS is reviewing ERC refunds as part of its audit and compliance efforts. This includes examining the legitimacy of claims and verifying that businesses met the eligibility requirements. Refunds may be delayed if the IRS determines that additional review is necessary.

What Triggers an ERC Audit?

Several factors can trigger an ERC audit, including discrepancies in payroll records, unusually large claims, or information provided by third-party promoters. The IRS uses data analytics and other tools to identify high-risk claims for further review.

How to Prepare for an ERC Audit

Businesses should maintain thorough documentation supporting their ERC claim, including payroll records, financial statements, and eligibility calculations. Respond promptly to any IRS requests and consider consulting a tax professional if audited.

IRS Warnings and Guidance

Is the IRS warning about ERC credit?

The IRS has issued multiple warnings about ERC credit scams and aggressive marketing tactics. The agency urges businesses to be cautious when working with third-party promoters and to ensure they meet all eligibility requirements before claiming the credit.

Conclusion

With increased IRS scrutiny, it’s essential for businesses to ensure their ERC claims are accurate and well-documented. Staying informed and prepared can help navigate the audit process successfully.

ERC Audit