Employee Retention Tax Credit (ERC)
The Employee Retention Tax Credit (ERC) is a pandemic-era refundable payroll tax credit designed to incentivize employers to keep their employees on the payroll during a government shutdown related to COVID-19 or significant decline in gross receipts. The deadline to claim the ERC was April 15, 2025, however, the IRS’s ERC enforcement efforts are anticipated to extend far beyond.
The IRS has issued warnings to taxpayers related to ERC schemes that present misleading claims about the credit’s eligibility requirements and that offer to help taxpayers claim the credit. Still, many taxpayers may have unknowingly submitted invalid ERC claims to the IRS.
If you –
- are currently undergoing an ERC audit,
- are buying or selling a business that claimed the ERC, or
- claimed the ERC but are unsure if you have the documentation needed to substantiate your claim,
then it is important that you consult with a tax attorney well-versed in the latest IRS guidance on ERCs.
ERC Audit
If your business is facing an audit, you should be prepared to provide detailed documentation to substantiate your ERC claim. Jackson Walker’s tax attorneys can advise on how to navigate an ERC audit and how to get your ERC eligibility documentation ready – either in the context of an IRS or private audit. A few examples of how our attorneys have helped taxpayers facing ERC audits, include:
- Successfully defended a business’s ERC claim in an IRS audit based on the employer’s partial suspension of operations in several states over various periods of time due to government orders banning large in-person gatherings.
Buying or Selling a Business
The ERC raises a number of issues in M&A transactions. Buyers should identify and analyze any ERC claims made by the target business before completing the acquisition. Potential sellers would likewise be well-advised to analyze their ERC claim in order to be prepared to address ERC-related concerns raised by potential buyers. Jackson Walker represents buyers and sellers on the tax aspects of mergers and acquisitions, including issues related to ERCs previously claimed by seller. A few examples of Jackson Walker’s representative M&A ERC work includes:
- Helped seller negotiate rights to ERC proceeds paid out post-closing that related to a pre-closing period.
- Negotiated key protections for buyer to cover potential liability for questionable ERC claim made by seller prior to buyer’s acquisition of the company.
- Helped a business return ERC proceeds to the IRS upon learning that an ERC promoter had misrepresented ERC eligibility to the business.
Submitted an ERC Claim?
Jackson Walker’s tax attorneys have helped clients to better understand if a previously-claimed ERC was valid and how to improve their substantiation in support of the ERC claimed. If you are uncertain about your qualification for a previously claimed ERC or whether you have the support needed for an IRS audit, please contact us. We may also be able to help if you have a valid ERC claim for which the IRS is refusing or delaying payment.
