The IRS has launched a new Voluntary Disclosure Program aimed to help businesses that want to pay back the money they received after filing erroneous Employee Retention Credit (ERC) claims.
As part of this expanding effort for employers that claimed an erroneous or excessive ERC, the IRS also announced that it is sending up to 40,000 letters with proposed tax adjustments that will recapture the erroneously claimed ERC. These mailings are currently just for tax year 2020, and 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.
Employers interested in the ERC Voluntary Disclosure Program must apply by March 22, 2024. The program is not available to employers under criminal investigation or employment tax examination, or for employers who have received a demand for repayment.
Employers that the IRS accepts into the ERC Voluntary Disclosure Program will only be required to repay 80% of the credit they received. If the IRS paid interest on the employer’s ERC refund claim, the employer doesn’t need to repay that interest. Employers who are unable to repay the required 80% of the credit may be considered for an installment agreement on a case-by-case basis.
The IRS will not charge program participants interest or penalties on any credits they repay. However, if the employer is unable to repay the required 80% of the credit at the time of signing their closing agreement, then the employer will be required to pay penalties and interest in connection with entering into an installment agreement.
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 ERC claim and details about the services provided. Further qualifications and program details are in Announcement 2024-3 posted on IRS.gov.
Finally, the IRS continues to urge employers with pending ERC claims to consider a separate withdrawal program that allows them to remove a pending ERC claim with no interest or penalty.
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