Brotman Law May 4, 2024 14 min read

How Portland Businesses Can Protect Themselves From Employee Retention Tax Credit Audits

ERC Audit Defense in Portland, Oregon: What You Need to Know

Navigating the complex world of tax credits can be daunting for any business.

For Portland businesses, the Employee Retention Tax Credit (ERTC) offers significant benefits. However, it also brings the risk of audits.

Understanding how to protect your business from these audits is crucial. It can save you from costly penalties and unnecessary stress.

In this article, we'll provide actionable advice on ERTC audit protection. We'll cover compliance strategies, the role of a tax attorney, and more. Stay tuned to learn how to safeguard your Portland business from ERTC audits.

Understanding the Employee Retention Tax Credit (ERTC)

The Employee Retention Tax Credit (ERTC) is a relief measure for businesses. It was introduced to mitigate the financial impact of the COVID-19 pandemic.

The ERTC provides a refundable tax credit against certain employment taxes. It's available to businesses that retained their employees despite facing economic hardship due to COVID-19.

To be eligible for the ERTC, businesses must meet specific criteria. These include:

  • Experiencing a significant decline in gross receipts during a calendar quarter.
  • Having operations fully or partially suspended due to government orders related to COVID-19.

Understanding these eligibility criteria is crucial. It helps businesses claim the ERTC correctly and avoid potential audit triggers. In the next section, we'll delve into why ERTC audits occur and how your Portland business can prepare for them.

COVID-19 Orders That Impacted ERTC Eligibility in Portland.

While not a comprehensive list, here are some COVID-19 orders issued by the Mayor of Portland, Oregon, that impacted businesses during 2020 and 2021:

1. Declaration of a State of Emergency (March 12, 2020) - Mayor Ted Wheeler declared a state of emergency, which included provisions to help businesses by deferring water and sewer payments and providing eviction protections.

2. Economic Relief Fund (March 2020) - The City established a COVID-19 Economic Relief Fund, providing $2 million in grants to support small businesses affected by the pandemic, particularly those owned by or employing marginalized populations.

3. Temporary Ban on Evictions (March 17, 2020) - A temporary moratorium on evictions was put in place to protect small business tenants from being evicted due to nonpayment of rent as a result of financial hardships caused by the pandemic.

4. Utility Relief and Business Support (April 2020) - Portland extended utility relief by waiving late fees and expanding bill discounts for small businesses severely impacted by COVID-19.

5. Portland Small Business Relief Fund (April 2020) - This program provided immediate grants and zero-interest loans to small businesses, with a focus on preserving jobs and stabilizing local businesses.

6. Reopening Guidelines Issued (June 2020) - As Oregon began to reopen, the City of Portland issued guidelines to help businesses operate safely and in compliance with state health regulations, including sanitation and social distancing protocols.

7. Expansion of Street and Sidewalk Use (July 2020) - The city permitted businesses, especially restaurants and retail establishments, to use additional public right-of-way space for customer seating and queueing, helping them adhere to social distancing requirements.

8. Healthy Businesses Permit (Late 2020) - An initiative to issue free permits for businesses to operate in outdoor settings, such as streets and parking lots, extended through the winter to help businesses continue operations amidst ongoing indoor restrictions.

9. Support for Arts and Venue Organizations (2021) - Acknowledging the specific impact on cultural venues and arts organizations, Portland allocated funds to support these sectors, which were among the hardest hit by public gathering restrictions.

10. Restaurant Revitalization Fund (2021) - In coordination with federal efforts, Portland promoted access to the Restaurant Revitalization Fund, providing additional financial assistance to local food and beverage businesses to cover pandemic-induced losses.

These measures were designed to mitigate the economic impact on Portland's diverse business community, ensuring that both the health and economic well-being of the city were addressed.

Why ERTC Audits Occur and How to Prepare

The Internal Revenue Service (IRS) conducts audits to ensure compliance with tax laws. ERTC audits are no exception. They aim to verify that businesses claiming the credit meet all eligibility requirements.

Audits can be triggered by various factors. These include inconsistencies in tax filings, large ERTC claims, or random selection. Therefore, it's essential for businesses to maintain accurate records and ensure their ERTC claims are valid.

Preparation is key to surviving an ERTC audit. This involves understanding the audit process, maintaining proper documentation, and seeking professional help when necessary. In the following sections, we'll discuss these aspects in detail.

Remember, an audit is not necessarily a cause for panic. With the right preparation and response, your Portland business can navigate an ERTC audit successfully.

Common ERTC Claim Mistakes to Avoid

Many businesses make errors when claiming the ERTC. These mistakes can increase the risk of an audit. One common error is misunderstanding the eligibility criteria. This includes misinterpreting the rules around full or partial suspension of operations, or significant decline in gross receipts.

Another common mistake is poor record-keeping. Businesses must keep detailed records of qualified wages and health plan expenses. Failure to do so can lead to complications during an audit.

Lastly, businesses often fail to calculate the credit correctly. This can result from misunderstanding the rules or making mathematical errors. It's crucial to double-check all calculations before submitting your claim.

Essential Documentation for ERTC Audit Defense

Proper documentation is key to surviving an ERTC audit. It's not enough to simply claim the credit. You must also be able to prove your eligibility. This requires maintaining accurate and thorough records.

The IRS may request various documents during an audit. These can include payroll records, health plan expense records, and business financial statements. It's important to keep these documents organized and readily accessible.

Here are some key documents to keep on hand:

  • Payroll records showing the number of employees and their wages
  • Records of health plan expenses
  • Financial statements showing a significant decline in gross receipts
  • Documentation of full or partial suspension of operations due to COVID-19

Remember, the burden of proof lies with the business. It's your responsibility to provide the necessary documentation to support your ERTC claim.

Implementing Strong Compliance Practices

Compliance is not a one-time event. It's an ongoing process that requires diligence and attention to detail. Implementing strong compliance practices can help protect your business from ERTC audits.

Start by understanding the eligibility criteria for the ERTC. Make sure you meet all the requirements before claiming the credit. Regularly review IRS guidance and updates to stay informed about any changes to the ERTC program.

Finally, consider designating a team or individual to handle ERTC compliance. This person or team can be responsible for maintaining records, tracking changes to the ERTC program, and ensuring that your business remains compliant.

The Role of a Tax Attorney in Portland ERC Audit Defense

Navigating the complex world of tax laws and audit procedures can be challenging. This is where a tax attorney comes in. They can provide valuable guidance and support during an ERTC audit.

A tax attorney can help you understand the nuances of the ERTC. They can also assist in negotiating with the IRS and resolving disputes. Their expertise can be invaluable in ensuring that your business is prepared for an audit.

In Portland, there are many tax attorneys who specialize in ERTC audit defense. They understand the specific tax laws and regulations that apply to businesses in the area. They can provide tailored advice and strategies to help protect your business from audits.

Remember, the potential financial impact of an ERTC audit can be significant. Investing in professional legal help can be a wise decision to safeguard your business.

Proactive Measures: Internal Reviews and Mock Audits

One of the best ways to prepare for an ERTC audit is to conduct an internal review or mock audit. This can help you identify any potential issues or discrepancies in your ERTC claims before the IRS does.

An internal review involves thoroughly checking your documentation and compliance practices. It's a chance to ensure that you're meeting all the ERTC requirements. A mock audit, on the other hand, simulates the IRS audit process. It can give you a clear idea of what to expect during a real audit.

By taking these proactive measures, you can significantly reduce your risk of facing an unfavorable audit outcome. It's all about being prepared and staying one step ahead.

Responding to an IRS Notice or Audit

If you receive an IRS notice regarding your ERTC claim, don't panic. It's crucial to respond promptly and professionally. Gather all relevant documentation and consult with your tax attorney before replying.

During an audit, maintain a cooperative and calm demeanor. Remember, the IRS is just doing its job. Your goal is to provide clear, concise answers to their queries. Avoid volunteering extra information that isn't directly related to the audit.

In case of a dispute, your tax attorney can negotiate with the IRS on your behalf. They can help resolve the issue and potentially minimize any negative financial impact.

Conclusion: Creating a Comprehensive Audit Protection Plan

In conclusion, protecting your Portland business from an ERTC audit involves careful planning and diligent compliance. It's about understanding the ERTC, avoiding common mistakes, and maintaining thorough documentation.

With the right strategies and professional guidance, you can leverage the ERTC benefits while minimizing audit risks. Remember, proactive measures are your best defense.

"Sam is a wonderful, results-oriented and extremely knowledgeable and talented attorney, who really has 'heart' in working on behalf of his clients, and explains options in a straightforward, respectful manner. He has assisted us with great outcomes which have added to our quality of life. I would not hesitate to recommend Sam for his services as he is an ethical, personable and expert attorney in his field. You will likely not be disappointed with Sam's work ethic, approach and his efforts."

-Aileen Dwight, Licensed Clinical Social Worker & Psychotherapist

Last updated: May 18, 2024

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