Criminal Defense Lawyers

ERC Audit Lawyers

Last Updated on: 29th March 2025, 04:56 pm

ERC AUDIT

Businesses that were SEVERELY impacted by the pandemic often looked to the Employee Retention Credit (ERC) as a helpful tax incentive to help them get on their feet. This credit, which was introduced through legislation, and this very important act provided financial relief to employers who continued paying workers during times of economic hardship. Many companies that claimed this credit did so in good faith, but many also did it negligently – or in bad faith. However, an ERC audit that is launched by the IRS can be intimidating, because it could lead to serious legal penalties and even criminal implications. Below, we’ll discuss how these audits work, why they happen, and how Spodek Law Group can help defend you.

WHAT IS THE ERC AND WHY DO AUDITS HAPPEN?

The Employee Retention Credit was created to help businesses to retain employees when revenues fell. This credit, that was introduced under various stimulus bills, has eligibility requirements, which include the degree of revenue reduction and the size of the workforce. Employers who were qualified claimed the ERC on their quarterly tax returns.

An ERC audit is an investigation that is conducted by the IRS in order to confirm that your claim is correct. The IRS, which is the main tax agency in the United States, has the legal authority to look for suspicious or incorrect filings. According to the official IRS website, the agency can audit any return if it believes there were errors or falsifications. If the IRS finds that there was misleading information, the agency might look to pursue repayment of the credit, plus interest and penalties. The most severe consequence could involve criminal charges if there is evidence of fraud. The IRS is aware that many brokers falsely filled out ERC claims, in order to earn big rewards. They know that many businesses owners are unsure of what to do, and relied on brokers to help.

From the taxpayer’s perspective, an ERC audit that is requested by the IRS can feel overwhelming. Many business owners who were scrambling to stay afloat may have made mistakes without knowing it. From the IRS viewpoint, these audits are simply part of the agency’s duty to enforce tax rules. In other words, they see themselves as ensuring everyone follows the law. This difference in perspective often causes tension, especially when large sums of money are at stake.

POTENTIAL PENALTIES FOR ERC MISTAKES

If auditors determine that your ERC claim was incorrect, you could be told to repay the entire amount, plus interest. That repayment can create a burden that may severely damage your business. Moreover, the IRS can add additional fines that may easily exceed the original credit value. When these fines accumulate, they can lead to serious debt, which might cause a strain on your company.

Some cases prompt result in significant investigation if there are signs of intentional misconduct. If the government decides there was fraud involved, the penalties that you face can include felony charges. In these serious cases, you might face prison time if prosecutors prove that you purposely filed false returns. A conviction that is tied to tax fraud can also lead to a criminal record. Having that kind of record makes it difficult to secure future opportunities, because many lenders or suppliers will refuse to work with businesses that have felony histories.

In short, an ERC audit that leads to a fraud allegation can shut your doors or even put you behind bars. That possibility is why it’s so important to consult lawyers who have experience defending federal cases.

HOW SPODEK LAW GROUP CAN HELP YOU

Spodek Law Group, a top rated nationwide federal defense law firm created by Todd Spodek, has over 50 years of combined experience defending clients in complex investigations. Our team includes Federal criminal lawyers who understand how the federal process works. We have a track record that shows how seriously we take our clients’ defense. Here is how we can help you if you’re facing an ERC audit:

• Analyzing Financial Documents: We will examine payroll records, revenue statements, and supporting documentation that was used to claim the ERC. This can reveal whether a mistake occurred or if the IRS is overreaching. When our attorneys find errors that were made in good faith, we present those errors to prosecutors or investigators in order to argue against criminal charges.
• Communicating with the IRS: We can speak with IRS representatives who are handling your audit, and we can handle inquiries on your behalf. If you try to manage everything alone, you could accidentally provide information that weakens your defense. Remember – anything you say can, and will, be used against you. Our law firm can step in as your representative so that you’re not at risk of misstatements and at the risk of implicating yourself accidentally.
• Developing Defense Strategies: Our approach is grounded in the belief that you deserve the best possible legal outcome. We can point out any lapses in the audit process, dispute the legal findings, and show how your business attempted to follow guidelines in good faith. Our lawyers will always look for ways to reduce or eliminate penalties.
• Negotiating Settlements or Fighting in Court: If the IRS insists on penalties or further action, we can negotiate on your behalf. If necessary, we will represent you at trial. Our lawyers, who have handled federal cases nationwide, are committed to seeking a resolution that works in your favor.

COMMON DEFENSES IN ERC AUDITS

There are several defense strategies that may apply when your ERC claim is questioned. For example, there might be evidence that was incorrectly interpreted by the agency. When that happens, we can challenge the methods and force the government to reconsider its conclusion. If this challenge succeeds, the auditors might reduce or drop the penalties against you. Our goal is to strike down evidence, and prove there’s no criminal intent – just a mistake.

Sometimes, mistakes that were made by a third-party payroll processor can shift the blame away from you and focus on negligence by other third parties. That situation can occur when you trust an outside service to prepare your returns, and that service overlooks certain details. In that instance, you can argue that you did not deliberately falsify anything. If the IRS accepts that you lacked criminal intent, the government could still pursue civil penalties, but it might not press criminal charges.

Another defense might involve tax law that was misapplied in your case. When the ERC first came out, some guidelines changed over time. Many business owners relied on confusing or outdated information. If we show that you acted based on the rules that were in place at that moment, the IRS might view your situation differently. That new perspective could result in a lower fine or a complete dismissal.

In the most serious cases, investigators who are looking for fraud might use search warrants or subpoenas. Evidence that was illegally obtained may be deemed inadmissible in court. Once that evidence is excluded, the government’s case could collapse. That collapse may cause the prosecution to offer a plea or drop the case entirely. In other words, the success of your defense may hinge on whether the evidence is valid.

CONSEQUENCES OF AN IRS AUDIT GOING WRONG

If an ERC audit that you face turns into a criminal indictment, your freedom and business are both on the line. That indictment can lead to public hearings, which may hurt your reputation. Your employees may worry about their paychecks, and your customers may question your reliability. This damage to your reputation might follow you even if the case is dismissed later. When finances are stretched thin by legal fees, you might struggle to cover regular business costs. That hardship can result in layoffs, higher interest rates on any loans, and lost partnerships.

During any federal investigation, prosecutors who are assigned to your case will look for any signs of wrongdoing. If they decide that there was deliberate tax fraud, you may face prison terms that range from months to years. Once you serve that time, you could be on probation, which places restrictions on your ability to travel or open new lines of credit. That probation might also require you to submit to regular check-ins and strict oversight. In effect, a conviction can reach into every aspect of your personal and professional life.

FREQUENTLY ASKED QUESTIONS (FAQ) QUICK-REFERENCE

CONTACT US FOR A RISK FREE CONSULTATION

If you are facing an ERC audit, we can help you nationwide. Spodek Law Group is available 24/7 to speak with you about your case. Our law firm is dedicated to providing top rated legal representation, and we understand how stressful ERC audits can be. Whether you need assistance preparing documents, negotiating with auditors, or fighting criminal charges in federal court, we are here to stand by you.

Disclaimer

Please note that no recipient of content from this article should act or refrain from acting on the basis of any content included here without seeking professional legal advice in the relevant jurisdiction. Spodek Law Group is a nationwide federal defense law firm, but laws vary by region, and each case is different. This article does not create an attorney-client relationship between you and Spodek Law Group. For official guidance on tax issues, you can visit the IRS website. If you have specific questions, we encourage you to reach out to a qualified attorney who can evaluate your situation in detail.