IRS Reopens ERC Voluntary Disclosure Program Until November 22
On Thursday, Aug. 15, 2024, the Internal Revenue Service (IRS) announced that it would send out up to 30,000 letters to taxpayers who may have received incorrect Employee Retention Credit (ERC) payments, totaling potentially over $1 billion. The move underscores the agency’s reopening of the ERC Voluntary Disclosure Program, which will remain open until Nov. 22, 2024.
The ERC was released in March 2020 to support businesses by helping them to keep employees on payroll during the COVID-19 pandemic. Over time the ERC has experienced various changes and amendments, and its eligibility qualifications are known as being complex to navigate for taxpayers. However, the ERC eventually became a target for aggressive, often misleading, marketing tactics, many of which may have claimed taxpayers could claim the credit without a thorough analysis of the eligibility criteria.
To help taxpayers, the IRS established the ERC Voluntary Disclosure Program, giving them a chance to voluntarily return funds received from an ineligible 2021 ERC claim. The initial round of the program, which ended in March 2024, provided a 20 percent repayment discount and yielded over 2,600 applications, representing $1.09 billion in questionable credits. The reopened program now offers a 15 percent discount on the ERC refund amount with no repayment of the interest income received and avoids penalties for businesses willing to rectify incorrect ERC claims. To qualify for the program, taxpayers must provide the name and contact information for any advisors or tax preparers who assisted with filing the claim. Businesses who have any doubt about their ERC eligibility or believe they may have been misled by aggressive marketing or promotions should strongly consider the disclosure program. You can read more about the qualifications for the disclosure program in our article, IRS Offers Discount Program for Questionable ERC Claims.
With the reopening of the disclosure program, the IRS will initially focus on claims filed before Sept. 14, 2023. The agency also hinted at the possibility of reopening the program at a reduced rate for taxpayers with previously processed claims who want to avoid potential IRS scrutiny.
The IRS also has an ERC withdrawal program that allows businesses to retract ERC claims without incurring penalties or interest. The agency treats a withdrawn ERC claim as if it were never filed.
As the IRS continues its efforts to address the widespread misuse of the ERC, taxpayers and businesses are encouraged to carefully review their claims with their trusted financial advisor and consider participating in the disclosure program if necessary. Windham Brannon’s Tax Controversy Practice is well-versed in helping taxpayers verify their ERC eligibility and weigh their options for voluntary disclosure or withdrawal with confidence. For more information on the disclosure program or withdrawal program, or for questions about the eligibility of your ERC claim, contact your Windham Brannon advisory today, or reach out to Tomika Bullet, Tax Controversy Practice Leader.
