How to Defend Your ERC Claim
Contents
- 1 How to Defend Your Employee Retention Credit (ERC) Claim
- 2 Understanding the ERC Audit Landscape
- 3 Building Your ERC Audit Defense Strategy
- 4 Meticulous Documentation
- 5 Thorough Legal Analysis
- 6 Aggressive Representation
- 7 Common ERC Audit Pitfalls (and How to Avoid Them)
- 8 The Spodek Law Group Difference
- 9 Getting Started: Schedule Your Free Consultation
How to Defend Your Employee Retention Credit (ERC) Claim
There’s one reason you’re on this website: you claimed the Employee Retention Credit (ERC), and now you’re facing an audit – or you’re worried you might get audited soon. Well, take a deep breath, because we’re here to help. At Spodek Law Group, we’ve made defending ERC claims one of our top priorities. Why? Because the ERC was a lifeline for so many businesses during the pandemic – and we believe you deserve to keep every penny you rightfully claimed, without having to deal with the stress and hassle of an IRS audit alone. So, what do you do, if you get hit – with one of these things? Keep reading to find out.
Understanding the ERC Audit Landscape
First things first, let’s look at why the IRS is cracking down on ERC claims in the first place. The Employee Retention Credit was a key part of the COVID-19 relief efforts, designed to help businesses keep employees on payroll during shutdowns and disruptions. But, like any tax credit program of this magnitude, it was ripe for abuse. Unscrupulous “ERC mills” sprang up, making wild promises and filing dubious claims on behalf of unsuspecting businesses. The IRS has publicly stated that they’ve identified over $1 billion in potentially improper ERC payments. And now, they’re on a mission to recoup those funds – through audits, penalties, and even criminal investigations in the most egregious cases.Here’s the kicker though: the IRS isn’t just going after the obvious bad actors. They’re scrutinizing every ERC claim, even from businesses that made a good-faith effort to comply with the rules. Why? Because the ERC rules were complex, confusing, and changed multiple times over the course of the pandemic. It’s entirely possible – probable, even – that well-intentioned businesses made mistakes in calculating their credit or determining eligibility. So if you claimed the ERC, you need to be prepared to defend your claim. Even if you’re confident you did everything right, the burden of proof is on you to show the IRS that your claim was legitimate.
Building Your ERC Audit Defense Strategy
Defending an ERC claim isn’t like defending a typical tax return. The IRS auditors have been specially trained on the nuances of the ERC rules, and they’re going to scrutinize every detail of your claim. That’s why it’s critical to have a comprehensive defense strategy in place, built on three pillars:
- Meticulous Documentation
- Thorough Legal Analysis
- Aggressive Representation
Let’s dive into each of these in more detail.
Meticulous Documentation
The first step in defending your ERC claim is to gather and organize all of the documentation that supports your eligibility and credit calculations. And we mean everything – payroll records, financial statements, copies of government orders, health plan invoices, you name it. This documentation is your evidence, and it needs to be airtight. The IRS auditors will be looking for any holes or inconsistencies, so it’s crucial that your records are complete, accurate, and clearly demonstrate how you met the ERC requirements. One of the biggest mistakes we see is businesses relying on incomplete or sloppy documentation from third-party ERC providers. These “ERC mills” often took shortcuts and made assumptions, leaving their clients vulnerable to audits and penalties. At Spodek Law Group, we insist on reviewing every shred of documentation ourselves. We’ll work with you to fill any gaps and ensure that your records tell a clear, consistent story that the IRS can’t poke holes in.
Thorough Legal Analysis
Simply having documentation isn’t enough – you also need a rock-solid legal argument to back up your ERC claim. This is where our team of experienced tax attorneys comes in. We’ll conduct a comprehensive analysis of your specific situation, reviewing all of the relevant laws, regulations, and IRS guidance to determine whether you truly qualified for the ERC and whether your credit calculations were accurate. This analysis is critical because the ERC rules were complex and changed multiple times during the pandemic. There are nuances and gray areas that the IRS auditors will be looking for, and you need a team of experts on your side who can navigate these complexities and build an airtight legal case. For example, let’s say you claimed the ERC based on a government order that partially suspended your operations. The IRS auditor might argue that the order didn’t meet the “more than nominal” impact threshold required by the rules. In a case like this, our attorneys would dive deep into the specific language of the order, your operational records, and any relevant IRS guidance or court cases to build a compelling argument that the impact was, in fact, more than nominal and that you qualified for the credit.It’s this level of detailed, fact-specific legal analysis that can make or break your ERC defense.
Aggressive Representation
Finally, once you have your documentation in order and your legal arguments prepared, you need a team of aggressive advocates to represent you in front of the IRS. ERC audits can be contentious affairs, with the IRS auditors pushing back hard against claims they view as questionable. You need attorneys who aren’t afraid to go toe-to-toe with the IRS, who can forcefully present your case and negotiate from a position of strength. At Spodek Law Group, we take a hands-on approach to every ERC audit. Our attorneys will be with you every step of the way, from the initial audit notice to any appeals or litigation that may be necessary.We’ll handle all communications with the IRS, ensuring that no deadlines are missed and that your rights are protected. We’ll also be there for any in-person meetings or hearings, ready to aggressively advocate on your behalf and counter any arguments or challenges from the IRS auditors. And if the IRS ultimately denies all or part of your ERC claim, we won’t back down. Our team has extensive experience litigating tax cases in court, and we’ll explore every possible avenue for appeal to get you the credit you deserve.It’s this level of tenacious, uncompromising representation that sets Spodek Law Group apart. We understand what’s at stake for your business, and we’ll fight tooth and nail to protect your interests.
Common ERC Audit Pitfalls (and How to Avoid Them)
As we’ve helped clients navigate ERC audits, we’ve seen some common pitfalls and mistakes that can derail even the most well-intentioned claims. Here are a few to watch out for:
Pitfall #1: Failing to Aggregate Properly
One of the trickiest aspects of the ERC rules was the requirement to aggregate related businesses when determining eligibility and calculating the credit. If you failed to properly identify and include all related entities, your claim could be in jeopardy. Our attorneys will carefully review your business structure and ownership to ensure that all aggregation rules were followed correctly. We’ll also be prepared to counter any arguments from the IRS about which entities should or shouldn’t have been included.
Pitfall #2: Miscalculating Gross Receipts Declines
For businesses claiming the ERC based on a significant decline in gross receipts, the IRS will scrutinize your calculations down to the penny. Any errors or inconsistencies in how you defined and measured gross receipts could invalidate your claim. We’ll review your financial records in detail, cross-checking your gross receipts calculations against the IRS rules and guidance. If there are any issues, we’ll work to correct them and build a solid defense for the methodology you used.
Pitfall #3: Inadequate Documentation of Government Orders
If you claimed the ERC based on government orders that partially suspended your operations, be prepared for the IRS to demand extensive documentation and proof of how those orders impacted your business. Our team will ensure you have copies of all relevant orders, along with detailed records and communications showing how you adapted your operations in response. We’ll also be ready to counter any arguments from the IRS that the orders didn’t meet the “more than nominal” impact threshold.
Pitfall #4: Double-Dipping on Wages or Health Plan Expenses
The IRS will be on high alert for any instances where you may have improperly included the same wages or health plan expenses in multiple tax credit calculations, such as the ERC and the R&D credit. We’ll conduct a thorough review of all your tax filings and credit claims to identify and address any potential double-dipping issues before the IRS even raises them. Our goal is to eliminate any potential inconsistencies that could undermine your ERC defense.
Pitfall #5: Relying on Shoddy Work from Third Parties
As we mentioned earlier, many businesses relied on third-party ERC providers to handle their claims. While this is perfectly legal, it can create problems if those providers cut corners or made mistakes in their analysis. Our team will thoroughly vet any work done by third parties, reviewing their methodologies and calculations with a critical eye. If we identify any issues, we’ll work to correct them and build a stronger defense for your claim. These are just a few examples of the many potential pitfalls that can arise during an ERC audit. The key is to have a team of experienced attorneys on your side who can anticipate and address these issues before they become major problems.
The Spodek Law Group Difference
At this point, you might be wondering: why should I choose Spodek Law Group to defend my ERC claim? It’s simple. Every single client deserves honesty and white glove service – and that’s exactly what we deliver.From the moment you walk through our doors, you’ll notice a difference. Our team takes a hands-on approach, researching every intimate detail of your case and holding regular meetings to discuss strategy. We also pride ourselves on our accessibility. If an emergency arises, you’ll have a full team of attorneys available to assist you 24/7. No more waiting days for a response or feeling like you’re being ignored.But what really sets us apart is our unwavering commitment to getting results. We leave no stone unturned in preparing your defense, exploring every possible angle and argument to protect your interests. And if the IRS refuses to see reason? We’re not afraid to take them to court. Our attorneys have extensive experience litigating tax cases at all levels, and we’ll fight tirelessly to ensure you receive the full ERC credit you’re entitled to. Defending an ERC claim is no easy task, but with Spodek Law Group in your corner, you can face the IRS with confidence. We’ll be with you every step of the way, providing the aggressive representation and personalized attention you deserve.
Getting Started: Schedule Your Free Consultation
If you’re facing an ERC audit or are concerned about the validity of your claim, the time to act is now. The IRS isn’t going to go easy on you, and trying to navigate this process alone is a recipe for disaster. That’s why we encourage you to schedule a free, no-obligation consultation with our team today. We’ll review the details of your situation, assess the strengths and weaknesses of your ERC claim, and lay out a clear strategy for moving forward. Don’t let the IRS bully you into paying back credits you rightfully earned. With Spodek Law Group on your side, you can fight back – and win. Contact us now to get started. Call us at 212-210-1851 or schedule a free consultation online.