Substantiating the Employee Retention Credit

For all IRS filings, it is up to the business owner to keep records that back up the numbers on the returns. Just like you’d keep receipts, mileage records, and bank statements for your regular business taxes, it’s vital to keep records on hand for your ERC filing. The IRS has operations in place to test its processes to ensure that tax filings across the country have been executed properly.

ERC Specialists Provides:

What records does ERC Specialists provide upon request to substantiate the ERC returns filed?:

 We will provide you with copies of the questionnaire you completed as to how your business qualified. As well as any documents you provided to ERC Specialists relating to the returns, and our calculations of the credit.

Accuracy on this documentation is vital, and will support qualification for the credit. Remember, all the documentation we submit to the IRS comes from the company itself. This is why it is crucial for the company to be as honest and thorough as possible in the questionnaire and on their requested documents.

Client Provides:

What records should an eligible employer maintain to substantiate eligibility for the Employee Retention Credit?

An eligible employer will adequately substantiate eligibility for the employee retention credit if the employer creates and maintains records that include the following information:

Documentation to show how the employer determined it was an eligible employer that paid qualified wages, including:

  • any governmental order to suspend the employer’s business operations; 
  • any records the employer relied upon to determine whether more than a nominal portion of its operations were suspended due to a governmental order or whether a governmental order had more than a nominal effect on its business operations;
  • any records the employer used to determine it had experienced a significant decline in gross receipts;
  •  any records of which employees received qualified wages and in what amounts (ERC Specialists provides a qualified wage list to the business if requested by IRS)
  • Documentation related to the determination of whether the employer is a member of an aggregated group treated as a single employer for purposes of the employee retention credit and, if so, how the aggregation affects the determination and allocation of the credit.
  • Copies of the completed federal employment tax returns that the employer submitted to the IRS (ERC Specialists provides copies of the 941x returns to the business if requested).

How long should an eligible employer maintain records to substantiate eligibility for the Employee Retention Credit?

An eligible employer should keep all records of employment taxes for at least 5 years after the date the tax becomes due or is paid, whichever comes later. These should be available for IRS review.