2020 claims & Q1–Q2 2021
The audit statute of limitations for these periods has already expired.
Audit Defense
ERC Audit Survival Guide
Proper documentation is your strongest defense. As ERC audits become more common, here’s how to respond to an IRS Information Document Request and keep your business on solid ground.
Get in TouchWhile it may not be as immediately visible as other business priorities, having the proper documentation to support your Employee Retention Credit (ERC) claim is essential for all businesses. With ERC audits becoming more common, it’s important to ensure your claims are well-documented to maintain financial stability.
If you receive a letter from the IRS notifying you that your ERC claims are being audited, it may include an Information Document Request (IDR) — a formal request for specific records and documents related to your claim. Your first reaction might be concern, but understanding how to respond to an IDR will help you navigate the process smoothly.
The Basics
What Is an IDR?
An IDR — also known as Form 4564 — is sent by the IRS during an audit to request additional documentation or information. Its purpose is to verify the accuracy of your claim by examining the records that support your reported income, deductions, credits, and other tax-related items.
Responding to an IDR promptly and accurately is critical. If you fail to provide the requested documentation, your ERC claims could be denied. Review the IDR carefully and work with a tax professional who specializes in ERC matters to ensure you submit the required documents on time.
Be Ready
What You’ll Likely Need to Provide
While each IDR can vary based on the details of the audit, most businesses can expect to provide the following, as applicable. They generally fall into three categories:
- Payroll tax returns for Q2 2020 – Q4 2021 (e.g., Forms 941, 941-X, etc.).
- 2020 and 2021 Federal Income Tax Returns.
- 2020 and 2021 Forms W-2.
- 941 / 941-X Worksheet 1 used to calculate the ERC.
- If part of an aggregated or affiliated group, the same forms for each group member.
- Quarterly breakdown of wages paid in 2020–2021, by employee (as applicable).
- Quarterly Profit & Loss or Income Statements for 2019–2021.
- Names of the majority owner, spouse, and blood relatives.
- Names of employees who received wages for which the ERC was claimed.
- Breakdown of how wages were allocated between the ERC and PPP loans.
- PPP Loan Forgiveness Application (Form 3508).
- List of employees who took sick or family leave, including dates and amounts paid.
- Qualified health plan expenses (if applicable).
- Calculation of the average full-time employee count.
- For employers with more than 100 full-time employees in 2019 who claimed the ERC for 2020: documentation showing the ERC was claimed only for wages paid to employees not working.
- For employers with more than 500 full-time employees in 2019 who claimed the ERC for 2021: documentation showing the ERC was claimed only for wages paid to employees not working.
- Documentation of government orders restricting business operations due to COVID-19 — such as orders limiting commerce, travel, or group gatherings that resulted in the suspension of operations.
Recordkeeping
How Long to Keep Your ERC Records
Substantiating your ERC claim matters even if you aren’t currently under audit. Retain documentation for the full statute of limitations — which now depends on the quarter.
Q3 & Q4 2021
The One Big Beautiful Bill Act (signed July 4, 2025) extended the audit period to six years from the later of:
- the date the original return was filed,
- the date the return is treated as filed, or
- the date the ERC refund was received.
Keep all ERC records for these quarters for at least six years from those dates.
Note: The Tax Relief for American Families and Workers Act of 2024, which proposed a similar extension for all periods, never passed the Senate.
Need help responding to an IDR?
Call us at (410) 698-4005 or schedule a free consultation online.