Caroline D. Ciraolo shared her insight in a recent Tax Notes article by Lauren Loricchio entitled “Documents Shed Light on IRS Scrutiny of Employee Retention Credit” published on December 5, 2022. The article details the IRS’s issuance of training materials that explain how examiners should scrutinize the use of the employee retention credit.
The article notes:
Caroline D. Ciraolo of Kostelanetz LLP said that the time and effort invested in the training materials and the length at 72 pages “demonstrates the complexity of these provisions.”
Practitioners anticipated investigations well before the issuance of the IRS warning released in October, according to Ciraolo, a former head of the Justice Department Tax Division. “Every government relief program brings out those who seek to abuse the system, and the government is clearly interested in pandemic relief oversight and investigations,” she said.
Ciraolo said that taxpayers following that guidance could find themselves amending income tax returns now only to have the credits disallowed, thereby necessitating claims for refund of any additional income tax paid.
“And in some cases, Ciraolo said, “due to applicable statutes of limitations, taxpayers may need to file protective claims for refunds while an investigation is anticipated or pending.” “Moreover, if the government alleges that a claim for the ERC was intentionally false, a taxpayer that files amended income tax returns and protective claims for refunds may be accused of multiple false filings,” Ciraolo added.
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