The IRS has introduced a Voluntary Disclosure Program aimed at combating erroneous Employee Retention Credit (ERC) claims. This program allows businesses to return the ERC funds they received in error at a discounted rate. The deadline for applications is March 22, 2024.
Under this new program, eligible employers can repay 80% of the ERC claim they received. This initiative is part of the IRS’s broader efforts to address aggressive marketing tactics that led some employers to file questionable ERC claims.
The IRS is also encouraging employers with pending ERC claims to consider a separate withdrawal program, which allows them to remove their claim with no interest or penalty. To date, the IRS has received over $100 million in withdrawals as it intensifies audits and investigations into ERC claims.
Employers interested in the Voluntary Disclosure Program must apply by March 22, 2024. If accepted, they will only need to repay 80% of the ERC they received, with no additional interest or penalties. Employers unable to repay the full 80% at once may be considered for an installment agreement on a case-by-case basis.
To qualify for the program, employers must provide the IRS with details of any advisors or tax preparers who assisted them with their claim. Further eligibility criteria and program details can be found in Announcement 2024-3 on IRS.gov.
This new program provides employers who mistakenly applied for ERC with a much-needed option to correct their error. By offering a lower financial cost, the program aims to relieve taxpayers who were misled into filing questionable claims. Additionally, the program helps the IRS gather information on promoters who aggressively pushed employers to apply for the credit.
For more information on how to apply, visit IRS.gov and file Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, using the IRS Document Upload Tool. Employers who outsource their payroll must apply through their third-party provider.
The IRS has also provided a set of frequently asked questions to help employers understand the program’s terms. Once an application is approved, employers must repay 80% of the ERC they received, either online or by phone, using the Electronic Federal Tax Payment System (EFTPS).
Employers who believe they received an erroneous ERC payment are encouraged to take advantage of this program. The program’s 80% repayment figure is much more generous than the penalties and interest that could result from later IRS action.
The IRS continues to remind employers that there is still time to withdraw pending ERC claims under a special withdrawal process. This option allows employers to avoid future repayment, interest, and penalties. Employers have until at least the end of the year to request a withdrawal.
For more information on the ERC Voluntary Disclosure Program and how to apply, visit IRS.gov.
Check out our previous blog on choosing a tax return professional for your business requirements.
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