September 15, 2023
IRS Announces Heightened Audits and Six Month Processing Times on New ERC Claims Due to Suspected Fraud
The Road Map to being IRS Audit Ready for Your ERC Payroll Tax Refund
On September 14, 2023 the IRS announced six month processing times on new ERC tax refund claims and heightened audits due to concerns about the fraudulent filing of ineligible ERC payroll tax refunds . https://www.irs.gov/pub/newsroom/erc-eligibility-if-then-chart.pdf We support this action because we believe that taxpayers who file legitimate, eligible claims that meet ERC requirements are entitled to receive their refunds promptly and without fear of a future audit. Corporate Strategies Merchant Bankers CEO Tim Connolly states “IRS Notice 2021-20 shown below is the single most important “road map” in audit protection for the Employee Retention Credit Payroll Tax Refund. We use this foundation client document retention guide to determine ERC eligibility. Carefully following this checklist allows our clients to successfully defend any IRS review or audit of the client’s ERC refund. Any reputable service provider should utilize this IRS guidance to validate your refund as well.”
If you are concerned about unscrupulous service providers misleading you and want to avoid IRS repayment demands, penalties and interest assessments on your legitimate ERC tax refund claim in the event of a future audit, follow this IRS notice on the proper substantiation of your tax refund claim. You will sleep well at night, knowing the tax refund you have received is the one you will keep!”
IRS ERC NOTICES—Critical Document Substantiation Requirements
IRS Notice 2021-20 provides guidance to eligible employers about the records they should retain to substantiate eligibility for ERCs, located within Section N (Answer 70, 71.) Notice 2021-20 provides that the employer will have adequately substantiated eligibility for ERCs if the employer retains records that include the information listed below. (Answer 70.) Notice 2021-20 specifies that the documentation should be retained for five years from when the tax becomes due or is paid. (Answer 71.) Notice 2021-23 states that eligible employers must maintain documentation to support an employer’s eligibility based on a decline in gross receipts, without providing any concrete examples of documentation. Notice 2021-20 provides this specific list of documentation to substantiate eligibility for ERCs:
- Documentation to show how the employer determined it was an eligible employer that paid qualified wages, including:
- any governmental order to suspend the employer’s business operations
- any records the employer relied upon to determine whether more than a nominal portion of its operations were suspended due to a governmental order or whether a governmental order had more than a nominal effect on its business operations
- any records the employer used to determine it had experienced a significant decline in gross receipts
- any records of which employees received qualified wages and in what amount and in the case of a large eligible employer, work records and documentation showing that wages were paid for time an employee was not providing services.
- Documentation to show how the employer determined the amount of allocable qualified health plan expenses.
- Documentation related to the determination of whether the employer is a member of an aggregated group treated as a single employer for purposes of the employee retention credit and, if so, how the aggregation affects the determination and allocation of the credit.
- Copies of any completed Forms 7200 that the employer submitted to the IRS.
- Copies of the completed federal employment tax returns that the employer submitted to the IRS (or, for employers that use third-party payers to meet their employment tax obligations, records of information provided to the third-party payer regarding the employer’s entitlement to the credit claimed on the federal employment tax return).
ABOUT CORPORATE STRATEGIES LLC
Founded in the 1980s, The Corporate Strategies team www.CSBankers.com is comprised of experienced private banking professionals, former tax auditors, practicing tax lawyers/CPAs/ex IRS agents and dedicated staff. Since 2020, our team members have become known as trusted experts in CARES Act funding requirements, utilizing the IRS and Treasury published requirements for ERC payroll tax refund qualification. We have chosen to focus our meticulous compliance efforts to qualify the ERC payroll tax refund program to the most deserving of groups—– churches, schools, small businesses, and recovery startup businesses. We believe our strict compliance with IRS and Treasury guidelines has led to the most positive outcome possible—as of this date, none of our clients who have completed audits or reviews have had their PPP loans questioned or ERC payroll tax refunds denied, nor have any had an ERC audit or review that resulted in any assessment of penalties or interest.
Corporate Strategies has worked with a wide roster of clients. Previously funded ERC payroll tax refunds include:
Why Choose Corporate Strategies?
Since 1984, Corporate Strategies Merchant Bankers has provided private funding solutions from $2,500,000 to $25,000,000 for small to medium-sized (SMB) businesses and non-profits whose loan applications have been rejected by conventional banks. Our 40 years of experience uniquely qualifies us to bring our SMB clients the CARES Act Employee Retention Credit (ERC) Payroll Tax Refund Program. Here’s why:
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