Three Ways to Prepare for an ERC Audit

Did you get cash disbursements for your business through the Employee Retention Credit (ERC)? Did you know that it’s entirely possible that you could be audited and pay the price if your calculation was incorrect?  

If you’re a business owner, you likely qualified for anywhere from $5k - $500k or more  of government cash disbursements. You also received a variety of guidelines from Uncle Sam to “help” you calculate the numbers for the ERC. You didn’t have to go through a formal approval process and you may believe that your payroll company was responsible for accurate caluclations. (Spoiler Alert: They aren’t.)

We anticipate seeing many ERC calculations audited over the next few years.  But have no fear, at Oracle Profitability we’re here to help you get your paperwork in order. An audit can be no big deal or a huge headache depending on how you prepare for it. 

Avoid ERC Calculation Software

There is no software with the ability to accurately calculate the ERC on its own. If you get audited, it’s unlikely you’ll be able to go back in time and know exactly what numbers you typed into the software and why. Unfortunately, those written guidelines we referenced earlier won’t help you either. They’re confusing and can vary depending on each business’s individual circumstances. 

The IRS doesn’t care what software you used or which guidelines you interpreted, they only care about whether the calculation is correct. You as the business owner are responsible for that calculation. 

Document, Document, Document

The American Rescue Plan Act extended the statute of limitations to 5 years for auditing the ERC. This means that you could be audited anytime in the next five years. We don’t know about you but it’s hard enough to remember what we did yesterday, much less five years ago.

You’ll want to make record keeping for the ERC your top priority no matter who calculates your ERC. It’s an obligation, a responsibility, and safety net for the future of your business. 

Get an Expert Second Opinion

We know we’ve told you the ERC is essentially free money, but it could cost you if you are audited and you don’t prepare yourself now. We’ve said it before and we’ll say it again, this is the time it pays to hire an expert. We’ve made it our business to understand this process. Book a free consultation with us to learn more. 

We offer full service ERC calculation and we create detailed records for all of our clients in preparation for an audit, whether it happens or not. 

If you’ve already calculated your ERC but now you’re sweating it. We can review and amend your ERC to make sure you have the right numbers and detailed records. Schedule your free call with us today.

Check out our blog series on the ERC:

Take Advantage of the Employee Retention Credit (ERC)

Payroll Companies vs. Employers: Who is Liable for Errors when Filing for the ERC?