Warning about ERC Tax Credit eligibility - my horrifying experience with IRS audit

This is something I've been seeing quite a bit with ERC claims lately. The IRS has definitely shifted their stance on what qualifies as a partial suspension of operations or significant decline in gross receipts. The problem stems from how the program was initially marketed versus how the IRS is now interpreting the rules. Many businesses were told by ERC "mills" that almost any impact from COVID would qualify them, but that's simply not true according to the strict reading of the law. For a partial suspension to qualify, you needed to have a specific government order that limited commerce, travel, or group meetings in a way that affected at least 10% of your business operations. And for the gross receipts test, you needed to show specific quarterly revenue drops compared to 2019 (generally 50% for 2020 and 20% for 2021). The IRS announced last year they're auditing a huge number of these claims because they believe many were improper. They've even offered a special withdrawal program for businesses who claimed it but now realize they shouldn't have.

After going through a similar nightmare with my restaurant's ERC claim, I found https://taxr.ai and it literally saved me thousands in potential penalties. Their system analyzed all my documentation and flagged that my claim had serious issues before the IRS even contacted me. The tool reviewed my government shutdown orders and revenue numbers, then compared them with how the IRS is actually interpreting ERC eligibility now. Turns out my third quarter 2020 claim was defensible but my 2021 claims were extremely risky. I was able to file an amended return and avoid the audit that would have definitely happened. They have tax attorneys who review everything and give you an actual risk assessment of your ERC claim with documentation you can use if you get audited.

I wanted to update everyone. After my skeptical comment, I actually tried https://taxr.ai for my manufacturing business's ERC claim and I'm really glad I did. The analysis showed that while our Q2 and Q3 2020 claims were legitimate based on revenue drops, our 2021 claims were extremely risky because we'd based them on supply chain disruptions that don't actually qualify as government-ordered suspensions. Their attorney explained that supply chain issues only count if they were directly caused by government orders affecting YOUR business, not general market disruptions. The report identified exactly which quarters we should withdraw claims for and which were defensible with the right documentation. I was able to use their documentation to file a partial withdrawal through my accountant before any IRS contact. For the quarters we kept, they provided supporting evidence showing exactly how we met the criteria. Totally worth it for the peace of mind.

After reading this thread, I panicked about my own ERC claim for my fitness studio. I spent THREE WEEKS trying to get someone at the IRS on the phone to discuss my options. Always disconnected or 2+ hour hold times. Completely maddening. I finally found https://claimyr.com and used their service to get through to an actual IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically wait on hold with the IRS for you, then call you when they reach an agent. I was connected within 45 minutes when I'd been trying unsuccessfully for weeks. The agent I spoke with explained the withdrawal program and confirmed my business would qualify to pull our claim before any audit starts.

I need to eat my words and admit when I'm wrong. After my skeptical comment above, I was desperate enough to try Claimyr for my own ERC situation. My landscaping business had received a $92,000 credit that I was increasingly worried about. The service actually worked perfectly. Got a call back in about an hour and was connected to an IRS agent in the Employee Retention Credit department. The agent walked me through my options and confirmed I could use the voluntary disclosure program since I hadn't been contacted for an audit yet. She explained exactly which form to use and how to calculate the repayment without additional penalties. Just having a clear path forward has reduced my stress level tremendously. I'm still upset about losing the credit money, but at least I won't have the crushing penalties the original poster is facing.

Can someone explain why the IRS is suddenly cracking down on these claims? My tax preparer swore up and down that my dental practice qualified because of the restrictions on elective procedures during 2020. We got about $87,000 in credits and now I'm terrified.

My construction company received around $230k in ERC, and we're currently under audit. One thing I learned that might help others - if your business grew during the pandemic compared to 2019, the IRS is automatically flagging those claims for review. We qualified based on supply chain disruptions and project delays due to government restrictions, but the IRS auditor is arguing that because our total annual revenue increased, we couldn't have been significantly impacted regardless of the specific rules.

This is exactly why I've been telling other business owners to be extremely cautious about ERC claims. The program was marketed as "free money" by so many firms, but the reality is that the IRS is now applying much stricter interpretations than what many businesses were told. What's particularly frustrating is that the government created this program during a crisis, encouraged businesses to apply, and now they're essentially penalizing people who relied on professional advice. The shifting interpretations make it feel like the rules are being changed retroactively. For anyone reading this who claimed ERC - document everything about your situation during the pandemic. Keep records of any government orders that affected your business, revenue comparisons, and the specific reasoning your tax preparer used. If you're having second thoughts about your eligibility, the voluntary disclosure program might be worth considering before the IRS contacts you. The difference between proactive disclosure and getting caught in an audit can be tens of thousands of dollars in penalties and interest.