The Biggest Misconception about the ERC

The Biggest Misconception about the ERC

by Dave Horwedel, EA

There is a common misunderstanding among taxpayers and inadequately trained tax professionals. They think the IRS gives them a refund after reviewing their tax return in detail. This is false. The IRS gives out a refund after receiving your tax return, and assuming there are no glaring errors that flagged by the computer, issue the refund. They assume your tax return is correct. They do not review the return in detail at that time.

Now, for usual tax filings, they have three years to audit your return and request a refund back. However, due to the concern of possible ERC fraud, the IRS has five years to audit you on the ERC. They are also adding on 87,000 additional IRS staff to increase their ability to collect taxes.

As a practical matter, if you had the requisite number of W-2 employees in 2020 and 2021 and correctly filed your 941X’s, the IRS will generally mail ERC refund checks as soon as the returns are processed.

But unfortunately, this does not necessarily mean that your firm was qualified for the ERC. Later on, up to five years later, the IRS can review your returns in detail and decide you do NOT qualify for the ERC. They can then contact you and demand the ERC money back, along with penalties and interest.

The ERC can provide much-needed relief for firms striving to recover from the COVID-19 pandemic.

But if you receive a large refund, spend it, then the IRS demands the money back along with penalties and interest, that can ruin your company. So it is vital, before you apply for the ERC, to determine with certainty whether your firm correctly qualifies or not.

We at Torchlight Tax are offering a free consultation and analysis to see if your firm qualifies. This is crucial and must not be done in a brush-off manner.

This is Dave Horwedel of Torchlight Tax. We are happy to get all the ERC you truly qualify for or to tell you do not qualify and end off there. If you have already applied for the ERC and are concerned, you may not qualify, we are happy to review your ERC and advise you on what to do. If you are under IRS audit, we are happy to defend you.

Remember, we are a full-service tax firm composed of EAs, CPAs, tax attorneys, and support staff. In addition to handling all ERC matters, we’ll be glad to service your personal and business tax needs in the years to come.

Contact Torchlight Tax for a free consultation at 1-877-758-7797 or email at can also read our tax blog at or watch our videos on the Torchlight Tax YouTube Channel. If you have any comments or questions, we’re glad to hear from you and respond. Just click below, call, or email us. We hope you found this article helpful. Thanks for reading. We look forward to hearing from you.

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