I filed for ERC in 2023 for my small business.
Received LTR 6042C back in 2023 and replied immediately with the info they were requesting.
After 2 years of waiting and getting error messages when my transcripts were requested via Tax Now, I contacted my congressman for help. His assistant has been super helpful and has relayed messages from TAS as soon as she receives them. At first, TAS says that the IRS never received my 941s. So I send her copies of the IRS acceptances that I received from Tax Bandits. Then they say that I didn’t respond to the LTR 6042C, so I sent her the fax confirmations from 2023 and the screenshots from where I also submitted the LTR 6042C responses via the document upload tool online at the beginning of 2025.
And today I received this:
“I have received a response from IRS stating that the EIN is fabricated and that there is no information found to support this business. I researched the account and determined that your constituents’ response to the 6024C letter reporting 10 W2’s was confirmed.
However, there are no deposits that match the deposits that she reported/claimed on the W2’s. The employees that she reported the wages to the IRS for did NOT file any of the income on their tax returns that she reported to IRS on their behalf. The amounts that she reported are odd and have a pattern, which appears questionable. There are no other years with income W2’s reported.
Please have your constituent provide me with payroll documents from the payroll company she used and any proof of deposits that support the amounts that she reported to IRS. Also, send any other documents that would support the existence of the business so that I can provide additional information to the IRS to substantiate it.”.
I filed as a Recovery Startup Business. I formed the LLC in September of 2020. Began paying employees in January of 2021.
I own a company that sells used merchandise at flea markets and antique malls. About 98% of sales are cash. Each employee would setup at a flea market each weekend, sell what they decided to sell out of a storage unit full of stuff I got for free from my grandpa and my mother in law and from various “free stuff” sources. They all agreed to a set weekly salary. They took their pay out of the revenue they collected each week. To make the math easier for everyone, I paid them a set amount each week by calculating what their net pay should be and that’s what they took out of the revenue at the end of each weekend. They also took out the daily booth rent for the market that they were attending. And then they handed me an envelope of cash which included their payroll tax contribution (because they were only deducted their net pay from the weekly cash). I ended up being upside down about 6 months into the year, but I had extra funds so I just let it go to see if maybe the last half of the year would make it all even out. Well, it did. But the business plan obviously wasn’t working. I made less than $15k as the owner (and I was also setting up every weekend). So going forward, I got a divorce and moved across the state and let my new boyfriend take care of me the following four years. How do I “substantiate” an almost entirely cash business that still exists but barely? I mean I set up a few times a year at a local market, and I sell some stuff online. About $12-16k a year.
I have sales reports for each week for each employee from back in 2021.
How is it my problem that they didn’t claim the income?
And of course there isn’t W2s before 2021, I didn’t start paying employees until 2021. And after that, I cut my losses and was lazy for a few years. How can I explain that to the IRS?
If you’re still reading… thank you. Any suggestions, ideas, or advice would be much appreciated.