The Internal Revenue Service (IRS) recently introduced a new Voluntary Disclosure Program aimed at assisting businesses that erroneously claimed the Employee Retention Credit (ERC). This initiative offers an avenue for these companies to return funds they received mistakenly, following misleading marketing around the ERC that led some employers to file incorrect claims.
This special disclosure program, which runs through March 22, 2024, is part of a broader IRS effort to clamp down on aggressive marketing strategies that have wrongly guided some employers. As part of this program, the IRS has included provisions allowing businesses to repay 80% of the claim received.
The IRS continues to encourage employers with pending ERC claims to consider its separate withdrawal program. This scheme enables them to withdraw a pending ERC claim without incurring interest or penalties. So far, the IRS has registered more than $100 million in withdrawals as it steps up audits and criminal investigations in this area.
In addition to these initiatives, the IRS will provide an update in the new year on the status of the moratorium. Earlier this month, the agency sent out 20,000 denial letters to ERC claimants.
To apply for the ERC Voluntary Disclosure Program, interested employers must submit their applications by March 22, 2024. Successful applicants will need to repay only 80% of the credit they received. Moreover, if the IRS paid interest on the employer’s ERC refund claim, the employer won’t need to repay that interest.
Employers who can’t afford to repay the required 80% of the credit may be considered for an installment agreement on a case-by-case basis. This consideration will be subject to the submission and review of a Form 433-B, Collection Information Statement for Businesses.
Program participants won’t be charged interest or penalties on any credits they repay. However, if the employer cannot repay the required 80% of the credit when signing their closing agreement, they will be required to pay penalties and interest in connection with entering into an installment agreement.
The IRS chose an 80% repayment rate because many of the ERC promoters charged a percentage fee that they collected at the time of payment or in advance, leaving recipients with less than the full amount.
To qualify for this program, the employer must provide the IRS with the names, addresses, and telephone numbers of any advisors or tax preparers who advised or assisted them with their claim and details about the services provided. Further qualifications and program details are in Announcement 2024-3, posted on IRS.gov.
In a further expansion of this effort, the IRS has begun sending up to 20,000 letters with proposed tax adjustments to recapture the erroneously claimed ERC. These mailings are currently only for the tax year 2020, but work continues for tax year 2021, with additional mailings planned. If the IRS identifies an employer that has received excessive or erroneous ERC, the agency will reclaim that ERC through normal tax assessment and collection procedures.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.