The Employee Retention Credit (ERC) is a refundable tax credit designed to provide financial assistance to businesses that maintained payroll during the COVID-19 pandemic.
The ERC tax credit was designed to allow eligible businesses to claim a percentage of qualified wages paid to employees, including certain health insurance costs. This credit is refundable, which means businesses can receive a direct payment from the IRS if the credit amount exceeds their payroll tax liability. For many businesses, the ERC has been crucial in covering expenses, preserving jobs, and staying afloat during periods of reduced revenue or operational disruptions.
While this was incredibly beneficial to small businesses during the pandemic, many Florida business owners are now experiencing difficulties with filing ERC claims with the IRS. Levin Law is here to help.
Navigating ERC Audits and Appeals
ERC audits and appeals may seem complex, but understanding the audit process and how to appeal to the IRS will make all the difference. ERC audits are conducted by the IRS when a business is suspected of filing an ineligible, fraudulent ERC claim. Companies who believe their claim was wrongly denied, may appeal to the IRS. Having an attorney review your claim will ensure that your audit or appeal has been properly assessed by the IRS. If your claim was denied, our team is prepared to file a lawsuit if necessary.
It’s important to note that the IRS has three years to audit ERC claims from 2020 through the first half of 2021. However, the IRS has implemented a voluntary disclosure program that allows qualifying businesses to repay 80% of the credit and be exempt from an audit on the ERC claim.
Resolving ERC Issues with Providers or PEOs
Professional employer organizations (PEOs) play a crucial role for many small businesses by handling various aspects of employment, including payroll, taxes, and benefits. When it comes to ERC, PEOs often play a significant part in:
- Filing ERC Claims: Given their knowledge of payroll and tax matters, PEOs frequently file ERC claims on behalf of the businesses they serve.
- Navigating ERC Complexity: The ERC program has intricate rules and eligibility requirements. PEOs can leverage their knowledge and resources to help businesses navigate these complexities and ensure accurate claim submissions.
- Resolving Disputes: In cases where the IRS denies an ERC claim or raises concerns, PEOs can assist their client businesses in resolving these issues. This may involve:
- Gathering supporting documentation: PEOs have access to payroll records and other relevant data that can be used to support ERC claims.
- Communicating with the IRS: PEOs can act as intermediaries between the business and the IRS, facilitating communication and addressing any inquiries.
- Exploring potential avenues for appeal or correction: If necessary, PEOs can assist businesses in appealing denied claims or correcting errors on existing claims.
By effectively collaborating with their PEOs, businesses can increase their chances of successfully obtaining the ERC and minimize potential issues during the claim process.
Strategies to Expedite ERC Refunds
The effectiveness of these strategies can vary depending on the specific circumstances of your case and the current processing times within the IRS.
Filing a Taxpayer Advocate Request
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers resolve tax problems they can't resolve on their own. If you're experiencing significant delays with your ERC refund, you can file a request with TAS. TAS can intervene with the IRS on your behalf and advocate for a quicker resolution.
Making a Congressional Inquiry
You can contact your local Congressional representative's office and request assistance with your ERC refund. Your representative's office can inquire with the IRS on your behalf and potentially expedite the process.
Filing a Lawsuit Against the IRS
If you've exhausted other avenues and are still experiencing significant delays or believe the IRS has wrongfully denied your claim, you may have the option to file a lawsuit against the IRS in federal court to recover your ERC refund.
What is ERC Litigation?
Every tax payor has the right to file a lawsuit against the IRS if a tax refund has been delayed more than six months, including businesses waiting for their ERC funds. The legal process typically includes a detailed review of the ERC claim and filing a lawsuit against the IRS in federal court. This process is complex and requires careful legal representation to ensure all requirements are met. If you're a business owner encountering difficulties with your ERC claim, such as:
- A Denied Claim: The IRS disallowed your claim.
- A Delayed Claim: Your claim has been pending with the IRS for more than six months.
- An IRS Audit or Investigation: The IRS is scrutinizing your claim, and you're concerned about potential penalties or adjustments.
Litigation may be the most effective path to resolve these issues.
Steps Involved in ERC Litigation
An experienced tax attorney in ERC litigation can assess your specific situation, determine the best course of action, and guide you through the legal process. Your attorney will help gather all necessary documentation related to your ERC claim, while preparing to file a lawsuit if necessary. The ERC litigation process will include discovery and pre-trial motions that will necessitate the need for an experienced attorney as it involves many complex legal issues.
What Documents Do You Need?
Gathering the necessary documentation is crucial for a successful ERC litigation case. Key documents typically include:
- Payroll Records: Such as payroll registers, paystubs for all employees, W-2 forms, and 941 forms.
- Financial Statements: Such as income sheets, balance sheets, cash flow statements, and bank statements.
- IRS Correspondence: Any correspondence with the IRS regarding your ERC claim, including audit notices, denial letters, and any appeals filed.
- Business Contracts: Contracts with employees, independent contractors, and any other relevant parties.
- Legal Documents: Documents like articles of incorporation, operating agreements, and any other documents related to your business.
- Supporting Documentation: Documentation supporting your eligibility for the ERC, such as evidence of qualified wages, business impact, or significant declines in gross receipts.
This is not an exhaustive list, and the specific documents required may vary depending on the unique circumstances of your case. It is crucial to maintain meticulous records throughout the year. This will not only help you accurately calculate your ERC but also significantly strengthen your position in case of an audit or litigation.
Choosing the Right Court for Your Case
ERC refund lawsuits may be filed in the U.S. Court of Federal Claims or a U.S. District Court. The choice of court can have significant implications for your case, including potential difference in procedures, caseloads, and judicial expertise.
The U.S. District Courts offer potential advantages such as jury trials and potentially faster case resolution. You can file an ERC lawsuit with the U.S. District Court for the district your business is located.
The U.S. Court of Federal Claims specialized in cases against the United States government, including agencies like the IRS. Potential advantages include specialized expertise in tax law and potentially a more streamlined process for resolving tax-related claims.
Filing Your ERC Lawsuit
Successfully navigating the ERC litigation process requires careful planning and execution. The key steps involved in filing your lawsuit typically include:
- Case Evaluation with Levin Law: Consult with Levin Law attorneys to analyze your claim to determine the validity of your case and identify any potential errors.
- Gather Documentation: Keeping a detailed record of any supporting documents, including payroll records, tax filings, and correspondence with the IRS, will be vital to winning your case.
- Filing a Formal Complaint: With Levin Law, you can be assured that a detailed legal complaint will be filed outlining the dispute and advocating for the ERC refund you deserve.
- Negotiation or Trial: Depending on the specifics of your case, as they are all unique, your legal team may negotiate a settlement with the IRS or proceed to trial to resolve the dispute.
ERC Processing Time
The IRS is currently experiencing significant delays in processing ERC claims. While the deadlines for filing ERC claims were April 15, 2024, for the 2020 tax year, and April 15, 2025, for the 2021 tax year, the processing times have taken over a year for many companies.
The IRS has increased its scrutiny of ERC claims to combat fraud, leading to more thorough reviews and longer processing times. As well as a processing moratorium on many ERC claims, resulting in further delays. The IRS is currently facing a significant backlog of ERC claims, meaning the actual processing time for ERC claims can vary significantly depending on various factors.
Legal Support for ERC Litigation
Levin Law and it's co-counsel are well-regarded with a strong track record in tax law and litigation, including ERC claims.
- Experienced Tax Attorneys: Levin Law boasts a team of experienced tax attorneys with a deep understanding of the complex rules and regulations surrounding the ERC.
- Proven Success: They have a history of successfully representing clients in ERC disputes with the IRS, including audits, appeals, and litigation.
- Client-Centered Approach: Levin Law prioritizes client communication and works closely with clients to understand their unique needs and goals.
- Comprehensive Legal Services: They provide a full range of legal services related to ERC claims, from initial consultation and claim preparation to litigation and appeals.
Contact Levin Law for ERC Litigation Assistance
If your business was impacted by the Covid-19 pandemic, you may be entitled to the ERC tax credit created by Congress to help companies like yours. At Levin Law, we’re dedicated to helping you protect your business and recover the funds you’re entitled to. Contact us today for a free consultation to discuss your ERC options and learn how our experienced team can guide you through the ERC litigation process with confidence and care.
