The IRS is intensifying oversight of Employee Retention Credit (ERC) filings. After winding down its ERC Voluntary Disclosure Program in March 2025, the agency has launched a wave of audits and is scrutinizing claims submitted during 2023–2024.
1. ERC Overview & Recent Filing Surge
The ERC incentivized businesses to retain employees by offering refundable credits based on payroll and COVID disruptions. Its popularity soared—so did questionable claims—particularly through third-party “ERC mills.”
2. Latest IRS Actions
- Termination of disclosure program: In March 2025, eliminating an easy path to correct filings.
- Initiation of audits and fraud investigations: Hundreds of ERC claims are currently under review.
3. Red Flags Prominent on IRS Radar
- Reliance on assumptions without adequate supporting documentation.
- Aggressive application of qualifications without proper payroll or operational records.
- Use of third-party providers without due diligence or transparent methodology.
4. What Businesses Should Do Now
- Conduct thorough ERC reviews: Gather payroll, operational, and eligibility documentation.
- Prepare for audits: Organize files, document calculations, and anticipate IRS questions.
- Amend or withdraw suspect claims: If a claim lacks solid support, correction may be advisable.
5. How We Can Support You
- In-depth claim validation and risk scoring
- Audit defense services, including IRS representation
- Amended return filings and penalty avoidance strategies
- Strengthening internal documentation and controls
Conclusion & Next Steps
With the IRS actively auditing ERC claims, it’s critical to act now. If your business filed an ERC claim in 2023–2024, let us help you assess, document, and defend your position before it’s too late.
