Anecdotal Evidence that the IRS' Commitment to Auditing ERC is Not Mere Rhetoric

The IRS has been extremely vocal about its intensifying scrutiny of ERC claims, with IRS Commissioner Werfel declaring at yesterday’s IRS Nationwide Tax Forum that the IRS is “increasing audit and investigative activities against…businesses filing dubious [ERC] claims.” But is the Commissioner, as we like to question in Texas, “all hat and no cattle”? Anecdotally, the answer is definitely not.

I have several active employment tax audits, with one of them directly involving ERC. During the course of these months-long examinations, I have had the opportunity to visit with the IRS agents about the IRS’ focus on employee retention credits. Through these informal conversations I’ve learned that:

• The IRS hired a new crop of employment tax examiners and initiated vigorous training for all examiners on ERC last summer.
• At least in Texas and the surrounding areas, the IRS unleashed the first “wave” of ERC audits in late Q4 of 2022.
• Employment tax examination teams are being advised that nearly 100% of their workload over the next three years will consist of ERC audits.
• To manage this ERC-exclusive workload, IRS employment tax examiners are being instructed to turn back in, or quickly close, cases with issues unrelated to ERC.

Naturally we should take these comments with a grain of salt. Or for those of you who, like me, grew up in the 1980s, we should “Trust but Verify.” But giving even a little bit of weight to this anecdotal evidence, I feel confident in saying that the Commissioner has a rather big herd of cattle.

If you have any questions about this blog post or any other tax-related topic, please do not hesitate to contact me at adaddino@meadowscollier.com or (214) 749-2464.