By Ed Yoder, CPA, MSA

The Employee Retention Credit (ERC) was designed to offer financial relief to businesses impacted by the pandemic. However, due to a surge in claims partly prompted by aggressive marketing from some third-party advisors, not all claims met the program’s eligibility requirements. In response, the IRS temporarily halted the processing of new claims and introduced a withdrawal option for businesses to retract their claims over the past year.

The IRS is now taking additional action through the issuance of Letter 6612. This letter serves as a notice to businesses that their ERC claims are under audit. The primary objective of this audit is to confirm that the financial support provided by the ERC reaches only the businesses that truly qualify. As all types of businesses begin receiving these letters, the message is clear: respond within 30 days from the date the IRS mails the letter or risk losing the ERC.

What is Letter 6612?

IRS Letter 6612 serves as a notification to businesses that their claim for the Employee Retention Credit is currently under audit and temporarily on hold. This letter is a part of the IRS’s efforts to enhance the scrutiny of ERC claims, emphasizing the need for comprehensive documentation to substantiate each claim. The primary aim of this audit process is to ensure compliance with the ERC’s eligibility criteria.

[Insert Image of Letter 6612]

Included with Letter 6612 is Form 4564, Information Document Request (IDR), which poses 13 multi-part questions to the taxpayer. These questions are designed to assess the validity of the ERC claim, requiring detailed documentation as evidence. Taxpayers are expected to demonstrate their eligibility for the ERC by providing proof of how business operations were impacted by government-mandated shutdowns, including detailed calculations of the credit claimed and records of gross receipts for the relevant period.

Successfully responding to Letter 6612 involves answering all inquiries with adequate documentation to support each claim. By doing so, taxpayers facilitate the IRS in concluding the audit process. If the IRS determines that the provided evidence sufficiently supports the claim, it will proceed with processing the tax return accordingly.

Responding to Letter 6612

Upon receiving Letter 6612, businesses are advised to carefully review the enclosed forms and prepare the requested documentation. Businesses have several options for submitting their response, including uploading documents to a specific website, faxing them, or mailing them to the IRS.

Important Steps:

  • Review Documentation: Gather and review all documentation that supports the ERC claim, including payroll records, proof of business disruption due to COVID-19, and any relevant financial statements.
  • Consult with a Professional: Engage a tax professional experienced in ERC claims to review the documents and audit response. They can provide insights into the audit process and help ensure documentation meets IRS requirements.
  • Respond Promptly: Submit supporting documentation within the 30-day timeline specified in the letter to avoid delays or disqualification of the ERC claim.

Potential Outcomes of the Audit

After reviewing the submitted documentation, the IRS will determine whether the ERC claim is valid. If the documentation sufficiently supports the ERC claim, the IRS will process the credit. If not, the business may receive an audit report detailing changes or denials, at which point consulting with a tax professional for next steps is advisable.


What if I can’t provide all the requested documentation? 

Contact the IRS as soon as possible to discuss your situation.

What happens if I miss the 30-day deadline to respond to Letter 6612?

If you miss the deadline, the IRS may disallow your ERC claim entirely, which means you could lose out on the credit. It’s crucial to contact the IRS if you foresee a delay in your response.

How do I know if my business still qualifies for the ERC?

Review the eligibility criteria for the ERC as detailed on the IRS website. It’s advisable to consult with a tax professional who can help assess your business’s eligibility based on the latest IRS guidelines and regulations.

How long will it take for the IRS to process my response to Letter 6612?

Processing times can vary significantly depending on the complexity of your claim and the IRS’s current backlog. While there’s no standard timeline, it’s common for businesses to wait several weeks or even months for a resolution.

Navigating the audit process for the ERC can be challenging. However, understanding the importance of documentation and preparing a thorough response can help expedite the process. Contact Tax and Not-for-Profit Partner Ed Yoder for expert guidance and support in responding to IRS Letter 6612 and securing your ERC claim.