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PSA – Quick Snapshot of the IRS Employee Retention Credit Voluntary Disclosure Program

PSA: A Quick Snapshot of the IRS Employee Retention Credit Voluntary Disclosure Program

Late December the IRS rolled out a new voluntary disclosure program for taxpayers who improperly claimed the employee retention credit (“ERC”). I am writing a quick post about the highlights of this program as the deadline is March 22, 2024! Blink and you will miss it.

So here is what you need to know.

Basic Details

This voluntary disclosure program is open to taxpayers who improperly claimed the ERC. If you claimed an incorrect amount, meaning you do qualify for the ERC, then you do not qualify.

To be a qualified taxpayer you must:
• Have a processed ERC claim that resulted in a refund, or a credit applied to your payroll tax liability
• Not qualify for any amount of the ERC
• Not be under IRS examination regarding employment taxes
• Not be under criminal investigation by the IRS
• Not have been notified that the IRS has reversed or notified you of its intent to reverse your ERC to $0

Qualified taxpayers may come forward to repay the improper ERC using Form 15434. If approved, the taxpayer will be required to pay back 80% of the improper credit. The remaining 20% will be forgiven (to include the need to adjust wages). If you cannot pay the full 80% back, the IRS will consider allowing you to pay it back through monthly payments on a case-by-case basis. No settlement offers will be accepted.

Please note. voluntary disclosure does not protect you from criminal prosecution for fraud or other tax crimes; additionally, if you were convinced to claim the ERC by a promoter or other professional then you will be required to disclose that information.

What are the Benefits?

If you qualify, there are some significant benefits to the ERC voluntary disclosure program:

  • First, you need only repay 80% of the ERC claim you received as a credit or refund; the remaining 20% is forgiven (and not taxable to you).
  • Second, any interest you received as part of the ERC credit or refund does not have to be repaid.
  • Third, no interest and penalties will be due on the 80% repaid. If you cannot pay in full and the IRS accepts you into a payment plan, then you will owe interest and penalties but only on the 80% due.
  • Fourth, there is no need to amend any returns to reduce wage expense.
  • Finally, the IRS agrees not to examine the ERC claimed on any tax period that is part of the voluntary disclosure program.

How to Apply

If you meet the eligibility rules for the ERC-VDP, complete an application package by:

  • Preparing Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program
  • Preparing ERC-VDP Form SS-10, if your application includes tax periods ending in 2020
  • Ensuring that an authorized person signs your ERC-VDP application and, if applicable, ERC-VDP Form SS-10
  • Submit your application using the IRS Document Upload Tool by 11:59 p.m. local time on March 22, 2024

What Happens Next?

The IRS will review your application package and verify your eligibility for the ERC-VDP. You will receive a letter notifying you that the IRS has your application. The letter will also state if the application will be processed or if it was rejected (for example if your payroll tax return has been selected for examination).

In our next blog we will talk a bit more about some of the details of the program and what happens after the application is accepted.

Summary

Act now if you have a potential improper ERC claim. You have only until March 22nd of 2024 to apply. Once the clock strikes midnight this deal goes away! If you need help considering your options or assistance with preparing a package to submit to the IRS than give us a call.

Just remember that ERC claims are a huge area of fraud right now and the IRS is actively pursuing companies and tax preparers. If you have an ERC claim, you should talk with your tax adviser or someone who handles ERC claims to make sure you are not at risk of an IRS audit (or worse IRS criminal prosecution).

James D. Wade, Esq.
Beacon Tax Advocates, LLC
57 Portland Road, Ste. 3
Kennebunk, ME 04043
207-502-7181
jwade@beacontaxadvocates.com
www.beacontaxadvocates.com