SALT LAKE CITY, UTAH – Starting last week, the IRS commenced sending out Audit and Exam Notices to Taxpayers. Most of the IRS notices given to me by potential clients have dealt specifically with payroll tax issues. With this increase in audit activity, one thing I have noticed is that most of the taxpayers receiving these audit or exam notices are businesses that received the ERC. In addition, the quarter or quarters being audited are the same quarters where the taxpayer qualified for the ERC.
Over the next few weeks, I will be blogging about and highlighting what the IRS is looking at when it comes to ERC claims. From what I see based on news releases from the IRS and posts on LinkedIn by the IRS is that the IRS is focusing on what it calls “ERC Mills”. Here is a link to the IRS website discussing what these ERC Mills are and what to watch out for: www.irs.gov/erc
In speaking with these audited businesses and focusing on the ERC claims being made, what I have found is that these taxpayers have relied on at least one or possibly two concepts when making these ERC claims:
- A supply-chain disruption or impact claim; or
- A restriction or modification observed by a business solely under the CDC or OSHA position claim.
It is interesting to see that most of these Taxpayers have not been focusing on the Gross Receipt Reduction Test.
What I have found in working with these taxpayers is that the claims being taken are not baseless, but the ERC claims being made have stretched out eligibility when in fact the respective state or local restrictions have lapsed. In my next blog, I will start by focusing on supplier-based partial suspension. In the meantime, it will be interesting to see what will happen to those taxpayers who have stretched out claims inappropriately.
Tax problems are legal problems, and we solve both. If you or someone you know has an issue with paying their federal or state taxes and needs help to end their IRS nightmare, please contact Kent Brown at Strong & Hanni by either phone at (801) 532-7080 or email at: firstname.lastname@example.org or go to my personal Strong & Hanni webpage at: https://strongandhanni.com/attorneys/attorney-kent-brown/