What's Happening?
The IRS is increasing audit activity on 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
aid to businesses to help retain employees during the COVID-19 pandemic. Eligibility for the credit depended on whether a business was fully or partially suspended by government order or experienced a significant decline in gross receipts. Some businesses initially did not claim the ERC but later filed amended returns to retroactively claim it.
Why It's Important?
The IRS's intensified audit activity on ERC claims highlights the importance of compliance and accurate reporting for businesses. As the agency scrutinizes these claims, businesses must ensure they meet eligibility criteria and maintain proper documentation. This increased oversight may lead to financial implications for companies found to have improperly claimed the credit. The audits serve as a reminder of the need for transparency and adherence to tax regulations, which can impact business operations and financial planning.
