Facing allegations of Employee Retention Credit (ERC) fraud presents substantial risks for businesses and their owners. IRS ERC tax audits and investigations can lead to civil or criminal penalties, and once the IRS opens an inquiry, submitting a voluntary disclosure or withdrawing the business’s ERC claim is no longer an option. In this article, New Jersey IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what owners and executives need to know when the IRS targets their business for suspected ERC fraud.

While most IRS audits present risks for civil liability (i.e., liability for back taxes, interest and penalties), targeted taxpayers can also face criminal charges in some cases. Defending against an IRS criminal tax audit requires a very different approach, and it is critical that taxpayers targeted in these audits engage an experienced New Jersey criminal tax lawyer to advise them and communicate with the IRS on their behalf.

The Internal Revenue Service (IRS) relies heavily on its audit authority to hold businesses accountable for underreporting and underpaying their federal tax obligations. With additional resources at its disposal, the IRS has announced plans to increase its audit rate in 2024, and it has specific plans to target businesses for income tax fraud, employment tax fraud, Employee Retention Credit (ERC) fraud, and other corporate tax law violations. For companies that find themselves in the IRS’s crosshairs, engaging an experienced New Jersey business tax lawyer is a key first step toward achieving a favorable outcome.

The IRS’ Employee Retention Credit Voluntary Disclosure Program (ERC VDP) closes on March 22, 2024. With the filing deadline less than a month away, the IRS is encouraging all business owners to carefully review their ERC filings and determine whether a voluntary disclosure (or withdrawal) is warranted. As New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, while businesses that received improper refunds are allowed to repay just 80% of their refunds under the ERC VDP, those that haven’t yet received their refunds must withdraw their claims entirely.

A law pending before Congress would close the Employee Retention Credit (ERC) program early while also increasing the risks for businesses and promoters accused of ERC fraud. The Tax Relief for American Families and Workers Act of 2024 passed the House on January 31 by a vote of 357-70 and is expected to receive similar support in the Senate. Here, New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what business owners and promoters need to know.