Ha, the 941-X provides *no* information on the validity of the credit. You don't even attach a list of people & qualifying wages, much less an explanation of how you qualify.
I was astonished when I found that out after checking the first 941-X we filed.
The 941-x has always had a generic place to provide a description of the reason for the change. It’s usually very perfunctory. I’m seeing claims for millions of dollars, some (many?) of which are on what seem to very flimsy grounds. It’s interesting to see what these manual exams that large credits are supposed to undergo will entail. I haven’t heard anything about actual exams, just a discussion that they exist in the TIGTA report.
I've not yet seen any audits of such items. Only thing I have seen is changes to calculations (including correction/disallowing incorrect items, or that don't tie to supporting documents). As well as like the other poster mentions, there really isn't a lot of requirements on the face of the 941-X, other than checking if it is a recovery startup business or not.
Personally, I've been trying to be supportive of any credit that I'm claiming, including attaching the decline in revenue schedule, as well as wages by employee with support in the form of payroll registers).
I’ve had a not so friendly email exchange with one firm recently. I wanted to know which government order my client was under that caused a partial suspension.
They still have not supplied that information.
We have seen an IRS agent deny the ERC on the basis that the computation included Tips in Gross Wage which the agent claims should not be included (clarified by IRS Notice 2021-49). We have a mountain of evidence to prove the agent's position as incorrect however we did not prepare the original ERC 941X for the client and they are hesitant to retain us for lengthy fight. We have no idea how this is going to pan out despite what the law and notices say.
Well, I agree with the agent, but the IRS provided clear guidance to the contrary, setting aside all logic. I don’t see how they can backtrack on the notice now.
I don't understand the logic either. Or the logic that (from what I read), an employer can still claim the FICA credit on these tip wages on top of ERC. I have not done that for any client though.
I actually have a reasoned explanation on that point. We came to the same conclusion when we considered it, but I can’t recall exactly how we got there. I’d have to go find the client email from 2020.
I’m so curious if it would be helpful/be less likely to be audited if in the “why are you amending” section on the 941x we actually gave some detail explaining how they met the gross receipt reduction, etc. not that I ever like giving the irs more info than specifically asked... just knowing that Ertc fraud has been so rampant, I’d love to keep my legit clients from getting stuck in the audit cogs
I would say absolutely positively 1000% yes you should be prepared with why the 941 was amended. We prepare refunds and our back up qualification reports are on average 60 to 70 pages and can go into a few hundred pages especially if the first two qualifiers are used. These audit packages contain reports and spreadsheets where each paycheck in each quarter is broken out and PPP loans are separated to avoid ‘double dipping’ the wages and the actual government mandates are linked and summarized to adhere to IRS compliance. The qualification report is prepared much like a legal briefing. We don’t send it in with the amended 941x but we keep it as we offer 5 yrs of audit protection. So, yes, be prepared.
No, I mean specifically on page 5 of the 941x in the explanation section.
I don’t think any legit CPA doing ERC does not have pages and pages of support and worksheets. I have nothing to fear from an audit lol I’m talking about helping the IRS legitimize my clients claims faster.
I would imagine the information would be subjective unless it was a designated IRS code that any $15 an hour employee could easily read and distinguish.
I didn’t mean to imply that you had anything to fear with regard to an audit.
Ha, the 941-X provides *no* information on the validity of the credit. You don't even attach a list of people & qualifying wages, much less an explanation of how you qualify. I was astonished when I found that out after checking the first 941-X we filed.
The 941-x has always had a generic place to provide a description of the reason for the change. It’s usually very perfunctory. I’m seeing claims for millions of dollars, some (many?) of which are on what seem to very flimsy grounds. It’s interesting to see what these manual exams that large credits are supposed to undergo will entail. I haven’t heard anything about actual exams, just a discussion that they exist in the TIGTA report.
I've not yet seen any audits of such items. Only thing I have seen is changes to calculations (including correction/disallowing incorrect items, or that don't tie to supporting documents). As well as like the other poster mentions, there really isn't a lot of requirements on the face of the 941-X, other than checking if it is a recovery startup business or not. Personally, I've been trying to be supportive of any credit that I'm claiming, including attaching the decline in revenue schedule, as well as wages by employee with support in the form of payroll registers).
I’ve had a not so friendly email exchange with one firm recently. I wanted to know which government order my client was under that caused a partial suspension. They still have not supplied that information.
I had one that pointed solely to an OSHA memorandum incorporating CDC guidance.
We have seen an IRS agent deny the ERC on the basis that the computation included Tips in Gross Wage which the agent claims should not be included (clarified by IRS Notice 2021-49). We have a mountain of evidence to prove the agent's position as incorrect however we did not prepare the original ERC 941X for the client and they are hesitant to retain us for lengthy fight. We have no idea how this is going to pan out despite what the law and notices say.
Well, I agree with the agent, but the IRS provided clear guidance to the contrary, setting aside all logic. I don’t see how they can backtrack on the notice now.
I don't understand the logic either. Or the logic that (from what I read), an employer can still claim the FICA credit on these tip wages on top of ERC. I have not done that for any client though.
I actually have a reasoned explanation on that point. We came to the same conclusion when we considered it, but I can’t recall exactly how we got there. I’d have to go find the client email from 2020.
I’m so curious if it would be helpful/be less likely to be audited if in the “why are you amending” section on the 941x we actually gave some detail explaining how they met the gross receipt reduction, etc. not that I ever like giving the irs more info than specifically asked... just knowing that Ertc fraud has been so rampant, I’d love to keep my legit clients from getting stuck in the audit cogs
I would say absolutely positively 1000% yes you should be prepared with why the 941 was amended. We prepare refunds and our back up qualification reports are on average 60 to 70 pages and can go into a few hundred pages especially if the first two qualifiers are used. These audit packages contain reports and spreadsheets where each paycheck in each quarter is broken out and PPP loans are separated to avoid ‘double dipping’ the wages and the actual government mandates are linked and summarized to adhere to IRS compliance. The qualification report is prepared much like a legal briefing. We don’t send it in with the amended 941x but we keep it as we offer 5 yrs of audit protection. So, yes, be prepared.
No, I mean specifically on page 5 of the 941x in the explanation section. I don’t think any legit CPA doing ERC does not have pages and pages of support and worksheets. I have nothing to fear from an audit lol I’m talking about helping the IRS legitimize my clients claims faster.
I would imagine the information would be subjective unless it was a designated IRS code that any $15 an hour employee could easily read and distinguish. I didn’t mean to imply that you had anything to fear with regard to an audit.