The headlines are clear, the IRS has turned very negative towards the Earned Income Credit program. That includes claims that have already been paid, those that remain outstanding, and those that have yet to be filed. The IRS has expressed that it will:

  1. Aggressively audit ERC distributions already paid out, exposing the taxpayer who previously received credits and any professional who assisted in the claim process to future civil and possible criminal assessments and accusations, and
  2. Vet ERC claims that have already been filed but which still remain outstanding far more vigorously to determine eligibility and whether the amount of the claim is in fact factually justified and supported, and
  3. It will do the same with regard to future filed ERC claims.


As you know the rules that are said to apply to ERC claims have been fluid to say the least and the tests or standards that are said to apply have become increasingly terse, at the least. Meanwhile, the IRS has issued warnings that it will actively work to identify and pursue ERC return advisors who are associated with claims that the IRS is unwilling to accept.

Of course, as much as the IRS has expressed that these changes are required to stem the blatant abuse by some who were dedicated to ripping off the ERC program, many other taxpayers and professionals who acted in good faith feel as though they are being improperly and unfairly herded amongst all of those who did not.

In any case prudence requires a review of the ERC claim (941X returns) that were filed, or which can be filed to insure that the standards then relating to eligibility were/are met, and that the credit is properly quantified and not overstated.

This should be done by each participating taxpayer and the preparer / advisor. Of course, any preparer / advisor who has multiple (or more) clients who received or filed for ERC benefits should be highly motivated to review their entire ERC book of business to identify, address and resolve any insufficiencies or incongruities in, or amongst taxpayer filings because it is expected that the IRS will follow through with its enforcement pronouncements.


ERC eligibility must meet very technical requirements and be backed up with specific facts. As tax lawyers, and as advocates we are especially suited for these challenges. We can help you:

  1. Determine your eligibility so you can initially apply
  2. Review what you previously filed with the IRS to make sure you were eligible
  3. Represent you when you are audited or need to correct your previous ERC

Since the IRS believes tens of thousands of businesses improperly received ERC benefits it is gearing up to track those taxpayers down. And it will be using a very wide net.


The Employee Retention Credit was intended to help employers keep employees on the payroll during COVID.

But those credits depend on whether you’re eligible and that decision is based on laws that are complex and heavily dependent on your facts.

Unfortunately, tens of thousands of taxpayers have been told they qualified for ERC benefits when they did not.

You know what’s been going on.

Many taxpayers turned to mills that promoted easy money. They heralded that they secured hundreds of millions if not billions of ERC dollars for taxpayers. You’ve heard the pitch…

“We can guarantee your small business a refundable tax credit of $26,000 per employee”.

But the complex ERC tax laws require that your specific business operations, Covid related facts, and business financial information satisfy those requirements in order to PROVE your eligibility.

Because of that, many employers who received ERC benefits will be devastated when they can’t prove their eligibility.

And worse, many owners will be held personally accountable to pay.


Many businesses that received ERC benefits will be devastated when they’re audited and can’t prove their eligibility. And remember, the IRS has up to 5 years to audit ERC returns instead of the “usual” 3 years.

Worse, many owners will be held personally accountable to pay. And we can predict tens of thousands of taxpayers will bear that burden. For instance, in March 2022 the IRS had already identified 11,096 suspicious returns that claimed more than $2 trillion in ERC refunds. That’s $2 trillion.

And now it’s easy to estimate that the sum is billions if not trillions more.

Because of that the IRS has dedicated itself to tracking violators down. To do that it added $80 billion to its enforcement budget. So hoping that you’ll be ignored is not a rational choice especially since ERC laws allow the IRS to go back 5 years, not just 3.

At that point the IRS will demand that the full credit be paid back, and it will add huge penalties, and interest.

Add all of that up and many businesses will have to close down. Worse, the IRS will then expect individuals to pay.

And of course there is no statute of limitations if the IRS determines an intent to defraud or evade was involved. If so, even greater risks and burdens would be involved, like criminal tax evasion, filing false returns, or other federal crimes.

How’s that for painful?

The point is, if you have any doubt about your eligibility or if you sense something else was wrong or irregular, like the 17 red flags we outline in a few moments, you best address your concerns now.


Here are SOME of the red flags you have an eligibility problem:

  1. Your actual business revenue and COVID related events were not asked for, or reviewed.
  2. Your payroll information was not asked for or considered in detail.
  3. You weren’t given a file that contains all your business facts and financial records that prove your eligibility. You’ll need that when the IRS audits you.
  4. You received ERC benefits but didn’t have anyone on payroll.
  5. You received ERC benefits that were greater than your actual payroll.
  6. Your PPP loan was not properly excluded from your ERC filing.
  7. Your paid preparer did not sign your tax returns as a paid preparer.
  8. Your other businesses, known as affiliated or commonly controlled entities were not part of your eligibility decision.
  9. The number and relationship of your employees were not evaluated to determine whether they were “related parties” under the federal tax laws.
  10. Your ERC professional charged fees that were based on a percentage of the ERC you received — Some fees were as high as 40% of the ERC received. Imagine having to return the ERC money and pay huge IRS penalties and interest. How are you going to come up with the 40% you paid the professional?
  11. The fee agreement you signed says YOU decided you were eligible and not your paid professional.
  12. You paid fees before you received your ERC check.
  13. Your ERC check went directly to someone else.
  14. Your paid professional did not sign your ERC forms, isn’t insured, or is not regularly involved in the accounting or return preparation business.
  15. No one told you that your business income tax returns must be amended because you received the ERC benefits.
  16. You became aware of suspicious or illegal ERC related activities that you believe are extreme violations, or
  17. Whoever helped you is no longer in business, can’t be found, doesn’t answer the phone, doesn’t respond to your questions, or has been indicted or sued.

Obviously, this not a pleasant topic. But now’s the time to deal with it. Not years later.

Have us review your real eligibility. Know exactly where you stand. We’ll preserve the information that supports your eligibility and we’ll stand by our decisions. If you don’t do this nobody will do it for you.

We’ve been here for 43 consecutive years. We stand behind our work and we’ll be here for years to come.