What's Happening?
The IRS has increased audit activity targeting claims related to the Employee Retention Credit (ERC), a refundable credit established under the CARES Act in March 2020. The ERC was designed to provide
financial assistance to businesses to help them retain employees during the COVID-19 pandemic. Eligibility for the credit depended on whether a business was fully or partially suspended by government orders or experienced a significant decline in gross receipts. Some businesses initially did not claim the ERC but later filed amended returns to retroactively claim the credit.
Why It's Important?
The heightened audit activity by the IRS on ERC claims underscores the government's focus on ensuring the integrity of pandemic relief efforts. This move is significant for businesses that have relied on the ERC to maintain their workforce during challenging times. Increased scrutiny may lead to financial and legal implications for businesses that have claimed the credit, particularly if discrepancies are found. It highlights the importance of accurate reporting and compliance with tax regulations, which is crucial for businesses to avoid penalties and maintain financial stability.
