Most people are somewhat confused about Employee Retention Credit (“ERC”) issues. This is logical given the massive amount of information, much of it inaccurate, released by various sources over the past four years. Among the aspects that escape most people are the enforcement actions taken by the IRS. Understanding these is critical because taxpayers and other parties that might end up in the IRS’s crosshairs cannot effectively defend themselves if they do not know what their adversary is doing. This article, another in a long series, explores the major enforcement tactics used by the IRS thus far in challenging what it considers improper ERC claims.

Employers generally are required to withhold, deposit, and remit taxes on wages paid to their employees. They are obligated to file various returns with the IRS documenting their actions, too. Many employers hire a third-party payer (“TPP”) to handle these duties. Things often go smoothly, but issues can arise when situations get complicated. One example is when an employer files an Employee Retention Credit (“ERC”) claim through its TPP, the IRS allows it, and then it starts looking for persons to audit. This article, the latest in a long series, explains the various ERC laws and analyzes the four main sources of IRS guidance thus far about liability for tax underpayments and penalties resulting from improper ERC claims.

The IRS has focused on several different transactions in recent years, but its indignation now centers on certain positions taken by taxpayers in connection with Charitable Remainder Annuity Trusts (“CRATs”). This article describes a growing list of IRS efforts to stop what it deems abusive transactions involving CRATs. These include a legal memo, an injunction lawsuit, two Tax Court battles, a Dirty Dozen listing, and, most recently, regulations proposing to categorize items as “listed transactions.”