BENEFITS

ERC Audit Defense

Facing an ERC audit can feel overwhelming for any organization. But with the right preparation, you can lower the risk of having to pay back the money you’ve already received, or preserve your right to the credit if your claims are unpaid at the time of audit.
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Even if you filed your claim through another firm, you still have options to strengthen your position during an ERTC audit. Here’s how:

ERC Risk Assessment: A strong defense against ERC tax credit audits begins with understanding how COVID-19 restrictions impacted your business. Our CPA and Tax Attorney partners can review your records and identify the best way to prepare for an IRS audit of your employee retention credit claims.
Eligibility Analysis: Every quarter you claimed must meet IRS rules. Our CPA and Tax Attorney partners will perform a careful ERC eligibility analysis to back up your claim with solid documentation and reduce risk in future ERC credit audits.

Every business is different. Some are dealing with ongoing ERC credit audits, while others are preparing for the possibility of an IRS ERC audit. The good news is you still have options. Whether it’s defending your ERC claim, fixing a mistake, or responding to an IRS letter, we’ll help you make the right choice.

Don’t wait for the IRS to decide your outcome. Get expert ERC audit support today — Call 971-234-2400

In your free consultation, we’ll walk through your situation, explain your next steps, and give you the confidence to move forward.

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irs enforcement efforts

Why ERC Audits Are Increasing

The IRS has said it is “gearing up for audits of Employee Retention Credits.” This is part of a new, aggressive IRS ERC audit program targeting both past and current claims.
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The most common notice is IRS Letter 105C, which officially informs you that your ERC has been disallowed.

Why now?

Fraudulent claims filed by third parties.
Confusing rules that changed multiple times.
Large payouts, with the ERC worth up to $26,000 per employee.

Learn how to respond to IRS disallowance letters such as 105C, 106C, and 6577C.

IRS letters

Did You Receive an IRS ERC Disallowance Letter 105C or 106C?

As part of its enforcement efforts, the IRS has begun issuing employee retention credit disallowance letters. If you receive an ERC disallowance, it means your claim has been denied, either in part or in full.
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The most common notice is IRS Letter 105C, which officially informs you that your ERC has been disallowed.

Why does ERC Disallowance happen?

Missing or incomplete documentation
Errors in wage or headcount calculations
Misinterpretation of government shutdown rules
Aggressive claims filed by third-party promoters

What IRS Letter 105C could mean for your business

An ERC disallowance may require you to repay funds you have already received. In some cases, the IRS may also add penalties or interest if they identify significant errors.
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The good news is you still have options, such as filing an appeal, providing additional documentation, making corrections, or pursuing further defense with professional support.
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With the right guidance, you can challenge and resolve an ERC disallowance and protect your ERC claim.

Frequently Asked Questions

Who gets audited?

Any business or nonprofit organization that claimed the ERC can be audited. The IRS is focusing on:

Any organization that filed an ERC claim could find themselves audited

What documentation is needed for an IRS ERC Audit?

For an ERC tax credit audit, the IRS usually asks for:

Statement of facts
Payroll reports
Proof of COVID-19 restrictions or government orders
Revenue comparisons to 2019
Forms 941 or 941-X
ERC calculations
PPP info

The more complete your records, the stronger your defense.

If audited, do I have to return all the money?

Not necessarily. The outcome of your employee retention credit audit will determine if any portion of the refunds must be returned. This is why it’s important to seek professional help.

Are all quarters audited in an ERC Tax Credit Audit?

No. ERC IRS audits usually target specific quarters that raise questions. But you should keep records for all quarters in case they expand the review.

Is it just an ERC Audit or will other parts of my business be reviewed?

The main focus is your ERC audit, but if the IRS spots issues, they may also review payroll, deductions, or other areas of your taxes.

How will I know if I’m being audited?

If you’re selected for an ERC IRS audit, the IRS will send you an official notice by mail. The letter will explain what documentation they want and the deadline to respond. In some cases, you may receive IRS Letter 105C or IRS Letter 106C (LTR 105C or LTR 106c), which is the notice of an employee retention credit disallowance. Either way, it’s important to act quickly and seek professional guidance to protect your ERC claim.

How long do I have to respond to an ERC IRS audit request?

Depending upon the notice, you can have as little as 30 days. Deadlines are strict, so responding quickly, with professional help, gives you the best chance to keep your funds.

Can I appeal an ERC Disallowance or Letter 105C?

Yes. If you receive an ERC disallowance or IRS Letter 105C, you have the right to appeal. Many businesses are able to provide additional documentation or legal arguments that reverse or reduce the IRS’s decision.

Do disallowances always mean I owe money back?

Not always. Sometimes an ERC disallowance affects only one quarter or a portion of your claim. With the right representation, you may not have to repay the full amount.

What should I do if I receive IRS Letter 105C?

Don’t ignore it. Deadlines to respond are strict. Contacting a professional right away gives you the best chance to appeal, correct errors, or negotiate with the IRS before penalties or interest apply.

ERC Audits and ERC Disallowances